Bitcoin miner MARA Holdings Inc. (MARA) plans to sell $2 billion in shares to acquire more Bitcoin. MARA is following the example of Michael Saylor’s company Strategy, which has accumulated over 500,000 Bitcoin since August 2020.
How exactly does this work?
What’s unique about this plan is that MARA intends to finance the Bitcoin acquisition by selling its own shares. This is inherently a rather risky venture, as many shareholders are likely to initially react unenthusiastically.
This creates an unusual situation: The company issues new shares and dumps them on the market, only to buy back another asset class in return.
The hope, of course, is that the Bitcoin price will rise and shareholders will profit this way. But the whole thing remains a speculative strategy.
For Strategy, which now holds 506,137 BTC, this approach has paid off so far. The company sold not only shares but also corporate bonds (i.e., debt) to buy even more Bitcoin.
MARA is number two
MARA, originally a pure Bitcoin mining company, is currently the second-largest publicly traded Bitcoin holder after Strategy. The company owns 46,374 BTC worth approximately $3.9 billion. This puts it ahead of Tesla and Block, which hold 11,509 and 8,211 Bitcoin, respectively.
In July, MARA CEO Fred Thiel announced that his company would no longer sell Bitcoin. However, that’s easier said than done. After all, MARA is a mining company that has to cover ongoing costs.
If these costs exceed revenues for an extended period, MARA could be forced to sell Bitcoin again.
MARA’s stock is currently underperforming. Despite a 2,610 percent price increase over the past five years, the company is still well below its all-time high of 2021.
The 2021 bull market rally was a feast for investors in mining stocks. However, the picture is different this cycle. Strategy, in particular, is currently attracting all the attention on the stock market.
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