Stronghold Digital Mining announced it is considering a sale or other strategic alternatives aimed at maximizing shareholder value. The announcement came alongside the company’s disclosure of its robust first-quarter financial and operational results on May 2.
As part of its strategic review, Stronghold, with the guidance of Cohen and Company Capital Markets and legal advice from Vinson & Elkins LLP, is exploring various options.
These include the potential sale of all or parts of its business or other strategic transactions involving its assets. The review comes at a time when the company observes a valuation discrepancy compared to its peers in the Bitcoin mining, merchant power, and data center sectors.
However, the plan is not definite, and there is no deadline or timetable. Stronghold does not intend to make another announcement unless the board approves a transaction, until it does so, or unless it decides a disclosure is necessary.
Rising revenue
Stronghold reported $27.5 million of revenue during the first quarter of 2024, up 27% sequentially and 59% year-over-year. The vast majority of revenue, $26.7 million, came from crypto operations, while the remainder came from energy sales and other activities.
The crypto mining company reported reduced fixed costs in the first quarter, down 3% sequentially and 11% year-over-year.
It reported GAAP net income of $5.8 million and non-GAAP Adjusted EBITDA of $8.7 million in the first quarter.
Low valuation
Despite strong financial performance in the above areas, Stronghold CEO and chairman Greg Beard said the company has witnessed a valuation dislocation compared to peer Bitcoin mining firms and other related company types.
According to data from CompaniesMarketCap, Stronghold currently has a market cap of $40.4 million, considerably below the leading crypto mining company, Marathon, which has a market cap of $4.65 billion.
Beard described Stronghold’s potential for expansion of mining power and asserted the company has qualities that set it apart from most competitors.
Stronghold boasts substantial infrastructure, including over 130 megawatts of fully energized data center capacity and 4.1 exahash per second of installed hash rate capacity, with potential expansion up to 7 EH/s.
Additionally, the company owns 750 acres of land, transmission lines, and two merchant power plants with significant carbon capture potential, enhancing its appeal to potential buyers or partners.
