Investing.com - Marathon Digital (NASDAQ:MARA), one of the world’s largest bitcoin mining companies, has announced a significant increase in its cryptocurrency holdings. In a statement on November 27, 2024, the company revealed that it purchased 6,474 bitcoin (BTC) during the month of November, bringing its total holdings to 34,794 bitcoins, which is currently worth about $3.3 billion based on the current market price of $95,000.
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Marathon Digital Strengthens Its Position as One of the Largest Holders of Bitcoin
These acquisitions were funded by the company’s recent offering of $1 billion in convertible notes at zero interest. The company reportedly raised up to $980 million after deducting transaction costs. Marathon used some of that money, setting aside $200 million to buy back some of its 2026 notes.
The company also announced that it has allocated $160 million from its cash reserves to buy more Bitcoin in the future, especially if the price of the digital currency drops. The company said in its statement: “The remaining $160 million is available to buy more Bitcoin in the event of a price drop.”
With these latest purchases, Marathon Digital cements its position as the second-largest holder of Bitcoin among public companies, behind MicroStrategy. While MicroStrategy holds the largest share of Bitcoin at around 1.8% of the total supply, Marathon Digital’s holdings represent around 0.16% of the total supply.
“Bitcoin is something every company should have on their balance sheet,” CEO Fred Thiel said in a recent interview, citing bitcoin’s scarcity and use as a hedge against inflation and the devaluation of fiat currencies.
Significant increase in corporate holdings of Bitcoin
According to Bitcoin Treasuries, public companies’ holdings of bitcoin have risen from 272,774 to 508,111 since the start of the year. November alone saw companies buy over 143,800 bitcoin, a significant increase from the roughly 2,400 bitcoins bought in October.
MicroStrategy has led the way in bitcoin buying, adding more than 130,000 bitcoin in November. Other companies have also started to join the bitcoin acquisition race. For example, Rumble announced plans to invest $20 million of its cash reserves in bitcoin after CEO Chris Pavlovsky was encouraged by MicroStrategy’s Michael Saylor to embrace bitcoin as a treasury asset.
Earlier this month, AI technology company Genius Group acquired $14 million worth of Bitcoin. The company aims to increase its Bitcoin investment to $120 million, keeping 90% of its reserves in the digital currency.
Strategic plans for expansion and support of company resources
Marathon’s recent bitcoin acquisitions and financial moves are part of an expansion strategy. The $1 billion convertible note offering is the company’s second major funding round in 2024, following a $250 million round announced in July. The first round was also aimed at boosting bitcoin reserves and expanding mining operations.
“With the zero-interest financing, we are strategically positioned to capitalize on market opportunities and strengthen our role as a leading Bitcoin mining company,” the company said in a statement.
Marathon's bitcoin acquisition strategies and financial planning have been met with a positive response from the market, with the company's shares rising nearly 8% on Wednesday, for a year-to-date gain of about 14%.
The stock’s performance is attributed to the company’s ability to leverage its financial resources for growth, which is in line with the general market enthusiasm for Bitcoin. The massive surge in the value of the digital currency has also contributed to renewed interest among institutional investors and large companies, with the price of Bitcoin recently crossing the $95,000 mark.
Challenges facing the company in light of market fluctuations
The company has shown some financial challenges that could affect its long-term sustainability. One of the most notable of these challenges is “cash burn,” a term used when a company spends its cash reserves at a rapid rate without generating profits to match this spending. This is common in startups and companies seeking rapid growth by investing money in research, development, and expansion. It can also occur in companies that are facing financial difficulties or are making consistent losses.
Investing PRO data indicates that the company is using large amounts of cash to finance its expansion operations, which is leading to a steady decline in its financial reserves. Despite being a large and advanced company in its sector, the company is facing challenges in achieving sustainable profitability, which is raising concerns among investors.
In contrast, Investing PRO data based on the Pro Tips tool also shows that the stock is trading at a low P/E ratio relative to its expected near-term earnings growth, which could indicate a potential investment opportunity. For investors, this type of valuation is a sign that the company may be outdated in its market valuations, meaning that the stock could be bought at relatively low prices relative to the future earnings that the company may generate as its financial performance improves.
The low P/E ratio suggests that investors may be buying Marathon Digital’s future earnings at a significant discount. Given the company’s strategic plan to expand its investments in Bitcoin mining, this could provide investors with future opportunities to buy the stock with expectations of higher earnings once the market conditions improve and the company achieves greater financial stability.