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Future FinTech Stock Falls Despite Cryptocurrency Miner Acquisition

By Jon Quast - Apr 14, 2021 at 1:51PM

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The equity stake won't cost Future FinTech much. But it's providing a lot of cash to fund growth.

What happened

Shares of blockchain company Future FinTech (FTFT 3.33%) fell on Wednesday after the company announced it's taking a stake in a cryptocurrency mining company. Considering cryptocurrencies and cryptocurrency stocks have generally been on a hot run during this past week, one might have expected Future FinTech stock to rise on this news. But as of 12:45 p.m. EDT, it was down 9%.

So what

Future FinTech has entered an agreement with Mingtang Network Technology for a 51% equity stake. While the price could change by the closing date, the 51% stake is only expected to cost $7 million. However, Mingtang Network is needing a $91.7 million investment to significantly upgrade its cryptocurrency mining capabilities. With its 51% stake, Future FinTech will provide 51% of the funding -- almost $47 million. Perhaps its this added cost that has investors second-guessing this acquisition today.

A rising red arrow breaks near the top resulting in the tip of the arrow pointing down.

Image source: Getty Images.

For 2021, Mingtang Network is expecting to report at least $6.1 million in earnings before interest and taxes (a non-GAAP, adjusted earnings metric). If audited results don't reflect that, Mingtang Network's shareholders have agreed to make up the difference. 

No what

Growth by acquisition appears to be the ongoing strategy for Future FinTech. In just the past month, it's announced three other acquisitions ranging from a fintech company to an asset management operation. It's important to note that earlier this year the company backed out of previously announced acquisitions, so its deal with Mingtang Network today shouldn't be considered a done deal yet. 

It's also important to note that Future FinTech's business doesn't provide it with much money, so it's relied on stock offerings to fund these acquisitions. The company closed on a $35 million direct offering earlier this month.

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