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Big, Positive Catalyst Near for Bitcoin Co.

Source: Joseph Vafi

 

April 3, 2023 (Investorideas.com Newswire) The pending merger of this Canadian digital asset miner and a similar U.S. company should boost its share price and afford it synergistic benefits, noted a Canaccord Genuity report.

Hut 8 Mining Corp.'s (HUT:NASDAQ;HUT:TSX) pending all-stock merger deal with U.S. Bitcoin Corp. (USBTC) is "a material upside catalyst," reported Canaccord Genuity analyst Joseph Vafi in a March 10 research note. Both companies are digital asset miners.

"The addition of USBTC will be a game changer," Vafi wrote.

Attractive Return on Investment

Hut 8 offers investors significant potential return given the difference between its current share price of US$1.80 per share and Canaccord's target price on it of US$5 per share, recently lowered from US$6, Vafi noted. Additionally, the target price does not account for the expected benefits of the USBTC transaction.

The benefits "should drive a doubling of hash rate while also materially improving margins," wrote Vafi. "We also believe that over time bitcoin's spot price will rebound," adding yet more upside to Hut 8.

Canaccord rates Hut 8 Buy.

Benefits From the Merger

Vafi presented the gains Hut 8 will see both from the deal with USBTC and from its re-domiciling in the U.S. They include:

  • A large hosting business in bitcoin mining
  • A large footprint in bitcoin data center managed services
  • A doubling of its self-mining exahash capacity
  • A notable increase in its mix of cheap green power in the U.S.
  • Greater flexibility in terms of infrastructure to expand capacity
  • Access to broader capital markets distribution
  • Knowledgeable, experienced people in USBTC's management team

"We see a lot to like here in comparison to Hut 8 standalone," wrote Vafi.

Ongoing Operations, Issues

Hut 8 continues to successfully mine and grow its amount of held, or HODL (Hold On for Dear Life), bitcoin, Vafi reported.

Also, it is still dealing with two persisting problems. One is its legal dispute with Validus, which provided power at Hut 8's North Bay, Ontario site.

"We continue to believe that Hut 8 has a sound case in its disagreement with Validus," wrote Vafi.

The other issue pertains to the electrical infrastructure at Hut 8's Drumheller, Alberta site.

Q4/22 Revenue Down

The Validus and Drumheller issues, along with lower spot prices, a higher network hashrate and Hut 8 hanging on to its earned bitcoins all contributed to the company generating less revenue in Q4/22 than in Q4/21, Vafi explained. Specifically, Q4/22 revenue was CA$21.8 million (CA$21.8M), reflecting a 62% year-over-year decrease.

During Q4/22, the company mined 698 bitcoins, taking the total it is holding to 9,086.

One bright spot in its financial report is the steady cash flow Hut 8 is generating from its January 2022 acquisition of TeraGo's data center. Last year the business, not related to bitcoin mining, yielded US$16.9M, 11% of Hut 8's total revenue for 2022.

"We are encouraged by the revenue from its high-performance computing business, which continues to grow," Vafi commented.

Disclosures:

1) Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.

2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with: None. Please click here for more information.

3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.

4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.

5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.

Disclosures For Canaccord Genuity Corp., Hut 8 Mining, March 10, 2023

Analyst Certification: Each authoring analyst of Canaccord Genuity whose name appears on the front page of this research hereby certifies that (i) the recommendations and opinions expressed in this research accurately reflect the authoring analyst's personal, independent and objective views about any and all of the designated investments or relevant issuers discussed herein that are within such authoring analyst's coverage universe and (ii) no part of the authoring analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the authoring analyst in the research, and (iii) to the best of the authoring analyst's knowledge, she/he is not in receipt of material non-public information about the issuer.

Analysts employed outside the US are not registered as research analysts with FINRA. These analysts may not be associated persons of Canaccord Genuity LLC and therefore may not be subject to the FINRA Rule 2241 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Required Company-Specific Disclosures (as of date of this publication): Hut 8 Mining currently is, or in the past 12 months was, a client of Canaccord Genuity or its affiliated companies. During this period, Canaccord Genuity or its affiliated companies provided investment banking services to Hut 8 Mining. In the past 12 months, Canaccord Genuity or its affiliated companies have received compensation for Investment Banking services from Hut 8 Mining.

Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Investment Banking services from Hut 8 Mining in the next three months.

General Disclaimers: See "Required Company-Specific Disclosures" above for any of the following disclosures required as to companies referred to in this report: manager or co-manager roles; 1% or other ownership; compensation for certain services; types of client relationships; research analyst conflicts; managed/co-managed public offerings in prior periods; directorships; market making in equity securities and related derivatives. For reports identified above as compendium reports, the foregoing required company-specific disclosures can be found in a hyperlink located in the section labeled, "Compendium Reports." "Canaccord Genuity" is the business name used by certain wholly owned subsidiaries of Canaccord Genuity Group Inc., including Canaccord Genuity LLC, Canaccord Genuity Limited, Canaccord Genuity Corp., and Canaccord Genuity (Australia) Limited, an affiliated company that is 80%-owned by Canaccord Genuity Group Inc.

The authoring analysts who are responsible for the preparation of this research are employed by Canaccord Genuity Corp. a Canadian broker-dealer with principal offices located in Vancouver, Calgary, Toronto, Montreal, or Canaccord Genuity LLC, a US broker-dealer with principal offices located in New York, Boston, San Francisco and Houston, or Canaccord Genuity Limited., a UK broker-dealer with principal offices located in London (UK) and Dublin (Ireland), or Canaccord Genuity (Australia) Limited, an Australian broker-dealer with principal offices located in Sydney and Melbourne.

The authoring analysts who are responsible for the preparation of this research have received (or will receive) compensation based upon (among other factors) the Investment Banking revenues and general profits of Canaccord Genuity. However, such authoring analysts have not received, and will not receive, compensation that is directly based upon or linked to one or more specific Investment Banking activities, or to recommendations contained in the research. Some regulators require that a firm must establish, implement and make available a policy for managing conflicts of interest arising as a result of publication or distribution of research. This research has been prepared in accordance with Canaccord Genuity's policy on managing conflicts of interest, and information barriers or firewalls have been used where appropriate. Canaccord Genuity's policy is available upon request.

The information contained in this research has been compiled by Canaccord Genuity from sources believed to be reliable, but (with the exception of the information about Canaccord Genuity) no representation or warranty, express or implied, is made by Canaccord Genuity, its affiliated companies or any other person as to its fairness, accuracy, completeness or correctness. Canaccord Genuity has not independently verified the facts, assumptions, and estimates contained herein. All estimates, opinions and other information contained in this research constitute Canaccord Genuity's judgement as of the date of this research, are subject to change without notice and are provided in good faith but without legal responsibility or liability. From time to time, Canaccord Genuity salespeople, traders, and other professionals provide oral or written market commentary or trading strategies to our clients and our principal trading desk that reflect opinions that are contrary to the opinions expressed in this research. Canaccord Genuity's affiliates, principal trading desk, and investing businesses also from time to time make investment decisions that are inconsistent with the recommendations or views expressed in this research.

This research is provided for information purposes only and does not constitute an offer or solicitation to buy or sell any designated investments discussed herein in any jurisdiction where such offer or solicitation would be prohibited. As a result, the designated investments discussed in this research may not be eligible for sale in some jurisdictions. This research is not, and under no circumstances should be construed as, a solicitation to act as a securities broker or dealer in any jurisdiction by any person or company that is not legally permitted to carry on the business of a securities broker or dealer in that jurisdiction. This material is prepared for general circulation to clients and does not have regard to the investment objectives, financial situation or particular needs of any particular person. Investors should obtain advice based on their own individual circumstances before making an investment decision. To the fullest extent permitted by law, none of Canaccord Genuity, its affiliated companies or any other person accepts any liability whatsoever for any direct or consequential loss arising from or relating to any use of the information contained in this research.

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