Marathon Digital Holdings (NASDAQ: MARA), one of the largest Bitcoin mining companies in the US, saw its stock price drop by 18% on Friday, December 29, 2023. This was the worst single-day performance for the company since January 2023, when it fell by 23%. The stock closed at $24.78, down from $30.21 the previous day.
The decline was driven by several factors, including the overall bearish sentiment in the crypto market, the SEC’s ongoing investigation into Marathon’s operations, and the company’s recent acquisition of two Bitcoin mining sites.
How did the crypto market affect Marathon Digital?
The crypto market has been experiencing a prolonged downturn since November 2023, when China announced a ban on all crypto-related activities in the country. This caused a massive sell-off of Bitcoin and other cryptocurrencies, as well as a drop in mining difficulty and hash rate. Bitcoin, the largest and most influential cryptocurrency, fell below $40,000 for the first time since August 2023, and reached a low of $35,764 on Friday.
As a Bitcoin mining company, Marathon Digital’s revenue and profitability are directly tied to the price and network conditions of Bitcoin. The lower the price and the difficulty, the less profitable it is for Marathon to mine new coins. Moreover, the company also holds a significant amount of Bitcoin on its balance sheet, which means that it suffers from unrealized losses when the price drops. As of September 30, 2023, Marathon reported that it had 7,035 Bitcoin, worth about $280 million at the current price.
How did the SEC’s investigation affect Marathon Digital?
Another factor that weighed on Marathon Digital’s stock price was the ongoing investigation by the US Securities and Exchange Commission (SEC) into the company’s operations. The SEC issued a subpoena to Marathon in October 2023, requesting documents related to the construction and financing of its Hardin facility, a Bitcoin mining site in Montana. The SEC also asked for information about Marathon’s compliance with environmental, social, and governance (ESG) standards, as well as its accounting and reporting practices.
The SEC’s investigation raised concerns among investors about the potential legal and regulatory risks that Marathon faces. The company has not disclosed the details or the scope of the investigation, nor has it provided any updates on its progress or outcome. The uncertainty and the lack of transparency have eroded the confidence and trust of the market in Marathon’s business and future prospects.
How did the acquisition of two Bitcoin mining sites affect Marathon Digital?
On the same day that its stock price plunged, Marathon announced that it had acquired two operational Bitcoin mining sites, one in Texas and one in Nebraska, from Generate Capital, a finance company. The deal was valued at $178.6 million, and was paid entirely in cash. The two sites have a combined capacity of 390 megawatts, which will increase Marathon’s total capacity to 910 megawatts, making it one of the largest Bitcoin miners in the world.
The acquisition was intended to boost Marathon’s growth and competitiveness in the Bitcoin mining industry, as well as to reduce its cost per coin and increase its operational efficiency. However, the market did not react positively to the news, as some analysts and investors questioned the timing and the valuation of the deal. Some argued that Marathon overpaid for the sites, given the current market conditions and the uncertainty around the SEC’s investigation. Others suggested that Marathon should have used its cash to buy back its shares or to invest in other areas of its business.
What is the outlook for Marathon Digital?
Marathon Digital’s stock price has been on a roller coaster ride in 2023, reaching an all-time high of $166.40 in April, and then falling by more than 85% to its current level. The company has faced several challenges and headwinds, such as the volatile and bearish crypto market, the regulatory scrutiny and investigation by the SEC, and the competitive and dynamic nature of the Bitcoin mining industry.
Despite these difficulties, Marathon Digital has also achieved some notable milestones and accomplishments in 2023, such as increasing its Bitcoin production and holdings, expanding its mining capacity and portfolio, and becoming one of the first publicly traded companies to adopt the Bitcoin Mining Council’s ESG standards.
The company’s future performance and stock price will depend largely on how it navigates the changing and uncertain environment of the crypto space, as well as how it executes its growth and innovation strategy. Marathon Digital’s CEO, Fred Thiel, remains optimistic and confident about the company’s long-term vision and potential. He said in a recent statement:
“We believe we are well-positioned to capitalize on the tremendous opportunities ahead of us as we continue to scale our operations, optimize our mining efficiencies, and deliver value for our shareholders.”
