What happened
Shares of cryptocurrency miner Bit Digital (BTBT 5.08%) soared on Tuesday after the company announced details regarding an $80 million financing arrangement. And the price of Bitcoin (BTC 1.49%), which the company mines, has increased significantly over the past 24 hours and now sits above $50,000 per coin. As a result of these two things, Bit Digital stock was up a whopping 25% as of 1:45 p.m. EDT today.
So what
Bit Digital is raising cash by selling stock. It's selling over 13 million ordinary shares, and warrants that equate to over 10 million ordinary shares once they convert. The warrants have a conversion price of $7.91, and with today's 25% pop, we're already there. Therefore, investors should expect almost 24 million shares to be added to the total shares outstanding.
A cryptocurrency mining rig. Image source: Getty Images.
An increasing share count is an ongoing trend with Bit Digital. Before this offering, the company had 54.6 million shares outstanding (not fully reflected in the following chart), up sharply from the start of 2020.
BTBT average diluted shares outstanding (quarterly) data by YCharts.
Now what
In the second quarter of 2021, Bit Digital mined almost 563 Bitcoin, worth over $28 million as of this writing. Of course, the value of its cryptocurrency holdings could keep growing with increased adoption of Bitcoin. For example, Brazil is making news today saying it will soon legitimize the cryptocurrency as legal tender, as El Salvador did.
Furthermore, keep in mind that Bit Digital isn't mining as many tokens as it theoretically could, given that it's still relocating operations out of China. Today's financing arrangement will help this transition, which on one hand is good and likely why the stock popped so much today. But for this to be a company that generates meaningful shareholder returns long term, it will need to stop issuing new shares at its current pace.
