It’s been one-way traffic for London BTC Company shares since the firm changed its name from Vinanz, and the CEO said it was ‘doubling down’ on its Bitcoin strategy.
Investors in recent placings and retail offers at 13p and 18.5p are now heavily underwater, with the London BTC Company falling nearly every day since the fundraises.
That said, early investors who participated in fundraises in early June before the company’s shares spiked above 60p would have done very well indeed – should they have sold before the shares tumbled.
Investors should note that the dramatic erosion in value for BTC shareholders has unfolded despite Bitcoin prices reaching all-time highs last week.
With shares now trading at less than a fifth of their recent highs, is the London BTC Company primed for a rebound?
Unlike many London-listed companies jumping on the Bitcoin treasury bandwagon, the London BTC Company actually holds a substantial Bitcoin position, and has a good reason to – it’s a Bitcoin miner. According to the most recent Bitcoin purchase update, the company has 85.97 Bitcoin in its treasury, worth around $10.4m at current prices.
Despite the robust holding, a sizeable premium remains in the company’s shares compared to the underlying value of their crypto treasury. The London BTC Company is trading at around 3x mNAV. This is on the punchy side, although it’s not as high as other London-listed Bitcoin treasury vehicles.
In addition to its treasury, BTC also has underlying Bitcoin mining operations that need to be taken into consideration by investors.
In the 18 months to 28 February, the firm generated £957,473 from mining operations, resulting in a gross profit of £171,709.
The company has since expanded its Bitcoin mining fleet, and Bitcoin prices have increased. As a result, it should be generating more revenue and, consequently, higher gross profits.
However, administration costs (excluding share-based payments) were running at nearly £2m over the 18-month period, so the Bitcoin business mining operation is still likely to be running at a loss, or at best, breakeven. Should operations fail to become cash positive, BTC may be forced to sell Bitcoin to cover running costs – or raise further cash.
It will take a brave investor prepared to lose a substantial proportion of their investment to buy the London BTC Company shares at current levels, but a relief rally isn’t entirely unimaginable.