Toronto Stock Exchange-listed block reward mining company Hut 8 has raised $8.3 million to fund the upgrade of its hardware fleet of ASIC miners in its Alberta, Canada facilities.
The company recently announced it closed its previously declared underwritten public offering through a syndicate of underwriters. Hut 8 issued 5,750,456 new shares at $1.45 per unit. With each new share came a warrant to purchase an additional common stock of the Hut 8 at an exercise price of $1.80 per warrant within the next 18 months.
Hut 8 announced they intend to purchase a combination of MicroBT’s Whatsminer M30S, M31S, and M31S to increase maximum operating capacity by up to 200 PH/s. It expects to receive a shipment of the equipment between July and November 2020.
The much-maligned and all too common financing approach Hut 8 took is systemic of a last-ditch effort financing plan. Some publicly traded companies turn to these tactics to raise additional capital at any cost to forestall going out of business.
There is only so long that existing investors in block reward mining operations will continue to trust leaders that chip away at the BTC economy. Soon, they might realize that the benefits of continuing no longer outweigh the relief and potential higher payoff of starting anew.
Hut 8 shares price has steadily fallen since its June 3 peak of $1.92. The price drop might be a warning sign that existing shareholders aren’t too thrilled about the share dilution scheme.
New investors favor these methods because it allows them another way to speculate on the underlying stock. Inherently warrants are designed to entice speculators’ participation in a company’s sale during which, under normal circumstances, investors would shy away from the high-risk offering.
Even though Hut 8 extended its financial runway, it still faces a cloudy future because of the diminished block subsidy reward for discovering a block. BTC is still missing two critical ingredients for success, namely mass adoption and utility.
We might witness the natural selection of the blockchain infrastructure sector in real-time with the rising popularity of transaction processors and blockchain service providers like TAAL. It’s no surprise that some organizations choose to follow in the footsteps of TAAL shifting computing resources to support the only public blockchain capable of enterprise adoption, Bitcoin SV.
The volatile trading price of BTC and its failure to stay above the $10,000 benchmarks make Hut 8’s growth rate impossible to project. Block reward mining remains extremely fierce as smaller competitors have figured out how to game the difficulty algorithm to eke out more revenue before joining the failed businesses’ ranks. The uphill battle Hut 8 faces should make investors think twice about its long-term prospects.
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