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Why Cryptocurrency Miner SOS Plummeted More Than 30% Today

By Chris MacDonald – Nov 10, 2021 at 4:50PM

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Shareholders issued an SOS today following the company's equity issuance.

What happened

Popular cryptocurrency mining company SOS Limited (SOS 1.31%) saw some pretty terrifying turbulence today, closing down 30.8%. Shareholders appear to be issuing an SOS signal with this stock, sending shares toward their 52-week low.

For a stock that was trading at $15.88 at its highs this year, the move below $1.50 brings this crypto miner more than 90% below this peak. Accordingly, investors appear to be pricing in some relatively bearish momentum into this stock today. 

Investors in SOS appear to be pricing in a direct offering by the company to private investors. This private placement provides for $90 million in financing it hopes to use to fund its growth.

Person checking connections for cryptocurrency mining.

Image source: Getty Images.

So what

For a growth-oriented company like SOS, such capital raises are a good thing. Indeed, cryptocurrency miners typically seek out such equity investments to fund their growth.

However, investors appear to be dismayed at the discount provided on this private placement. The private placement was carried out at $1.75 per share, substantially below yesterday's close of $2.11 per share.

The rationale for this discount was not given. However, investors clearly don't like the dilutive nature of this deal, as well as the lack of institutional interest in buying shares at the market price. 

Now what

Sure, this $90 million in capital could help accelerate the overall hash rate and mining capacity of SOS. There's reason to be bullish on this company, from a long-term perspective.

However, investors digesting this deal don't seem to like what they see. Additionally, the fact that SOS is a China-based miner brings in a whole set of idiosyncratic risks to the discussion.

Accordingly, investors can expect more volatility on the horizon as investors consider which crypto miners to invest in right now.

Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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