The Bitcoin mining sector is currently facing significant discrepancies in its financial assessments, according to a note from JPMorgan analyst Reginald L. Smith. He highlights a disturbing trend where outdated or inaccurate share counts provided by Bloomberg for several prominent mining companies are leading to a substantial underestimation of their market value. Specifically, he points out that the diluted share counts for Cipher Mining Inc, CleanSpark Inc, Riot Platforms Inc, and MARA Holdings Inc are falling short by 20% to 33%. This oversight results in an approximate $8 billion underrepresentation of their combined market capitalization.
In the face of increasing operational demands, these mining companies have been rapidly issuing new stock to finance land acquisitions, high-performance computing (HPC) expansions, and long-term data center transformations. However, market data has not reflected these changes accurately. JPMorgan notes that Cipher Mining and CleanSpark have seen their diluted share counts rise around 20% since the last model update, while Riot Platforms and Marathon Digital Holdings have experienced increases exceeding 30%. The reliance on outdated figures for market capitalization and enterprise value calculations means that investors may be undervaluing these companies considerably.
This misalignment arrives at a pivotal time for the sector, which is beginning to split into two distinct groups. Companies like Cipher and CleanSpark are gaining momentum, bolstered by multi-year contracts in the HPC sector and expanding data-center capabilities that may soon surpass the value of traditional Bitcoin mining. Conversely, Riot and Marathon—known as significant “HODLers” of Bitcoin—are having their price targets lowered as they contend with diminishing Bitcoin economics alongside rising share counts.
The implications of this discrepancy are profound. According to Smith, incorrect share counts lead to flawed financial ratios and comparisons, affecting everything from enterprise value per megawatt to assessments of whether shares are cheap or expensive. As the sector undergoes a transformative shift toward AI-driven HPC revenue models, accurate financial metrics are vital for identifying genuine value amidst potential pitfalls.
In summary, the gap in share information not only reflects a technical mistake but could reshape investor perceptions about which companies are emerging innovators and which are merely inflating their equity bases. Accurate data is increasingly crucial in an evolving industry marked by significant changes and new competitive landscapes.
