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The top mining stock in Canada this year is producing cryptocurrency, not gold. That stock is HIVE Blockchain Technologies (TSXV:HIVE) and it has rallied more than 2,000% from its August financing price of $0.30 to a high of $6.67 on Friday.
HIVE is one of the only investment vehicles with exposure to blockchain technology and the crypto economy. It has cash flow and a credible growth story. Genesis Mining, HIVE’s 30% shareholder and strategic partner, is already the world’s largest digital currency mining hashpower provider. They have the expertise and relationships to build and operate the high tech data centres that mine the likes of Bitcoin and Ethereum at massive scale.
Investors have gobbled it up. HIVE’s market capitalization surpassed $1.5 billion briefly on Friday, after the company’s shares more than doubled in the previous four days of trading. Short sellers, or those betting against the stock, were forced to cover their positions with open market purchases in back-to-back trading sessions.
Management and the board of HIVE were concerned the climbing share price was unrelenting, according to a call with CEO Harry Pokrandt.
At roughly 11:15am PST on Friday, HIVE took an unprecedented step in an effort to cool the price, announcing the accelerated release of 24.6 million shares of previously issued but locked-up stock into the market to increase liquidity.
It worked. HIVE shares crashed more than $2 following the resumption in trading, wiping out more than $500 million in market capitalization in a matter of hours.
HIVE has been the most active TSXV stock this year. Friday’s trading session alone saw over 20 million shares exchange hands, representing nearly the entire free-trading float.
In an email, the company said it released the shares following queries from regulators, including IIROC, to create a more balanced market. Up to this point, roughly 90% of HIVE’s shares had been restricted from trading. The release was approved by both the TSXV and the company’s underwriter, GMP Securities. HIVE also noted that insiders and management are currently restricted from trading.
“I’m not worried about the volatility,” says mutual fund manager and HIVE's second largest shareholder Frank Holmes, who joined the company as Chairman. “Cryptocurrencies are volatile and HIVE is a cryptocurrency company. We anticipated this and just need to manage expectations. The business itself is doing what it is supposed to do: it is growing, and that’s all that matters.”
Frank Giustra, a large shareholder and advisor to HIVE, is well known to gold investors for co-founding, alongside Ian Telfer, Wheaton River Minerals, which became Goldcorp, one of the world’s top gold producers. Giustra and Telfer also came up with the concept of Silver Wheaton (now Wheaton Precious Metals), the first metal streaming company, with the largest revenue per employee of any public company in the world today.
Giustra wants to get the message out that he is committed to the long-term growth prospects of HIVE and has been buying HIVE shares in the open market on down days, including Monday.
Giustra says to substantiate a rising share price, companies should raise more cash and acquire bigger and better assets, something HIVE has been doing rapidly.
HIVE arranged three financings and acquisitions in as many months, bringing in ~$84 million cash, two operating facilities in Iceland, and an advanced project in Sweden that is expected to represent over 80% of HIVE’s hashpower capacity by March 2018.
“My primary goal and only concern is building the value of the company,” says Giustra. “This is typically a 3-5 year exercise and the daily share price does its thing in the meantime.”
Giustra says he turned his attention to the cryptocurrency space earlier this year at the urging of some young colleagues who were calling Bitcoin “millennial gold”.
“In my generation, investors who were suspicious of governments and the monetary system — any event that would be disruptive to their wealth — would buy gold. The hedge for everything was gold. For the millennial generation, it may be that they use cryptocurrencies to protect themselves against anything that could be disruptive to their wealth. I am trying to straddle both.”
Marco Streng could be to blockchain what Frank Giustra is to gold. The 29-year-old German mathematician and entrepreneur co-founded Genesis in 2013, survived the Bitcoin crash that followed, and scaled, without outside capital, the largest cryptocurrency mining business in the world.
Based in Hong Kong, Genesis operates computing facilities at several locations with cool climates, cheap electricity costs and reliable internet access. Genesis now has more than a million customers who leverage Genesis’ infrastructure to mine digital currencies.
Streng helped create HIVE Blockchain Technologies (TSXV:HIVE) to build a bridge from the blockchain space to the traditional capital markets.
“There was such huge demand for exposure to blockchain in the capital markets, just waiting for the right opportunity. And we provided that opportunity with HIVE. We now have the foundation to build HIVE into a global brand and blockchain leader,” Streng says.
In a show of confidence and support, Genesis invested $7 million in HIVE’s latest financing to maintain their 30% stake and expects to participate in future financings. And Streng says Genesis will back that investment by continuing to help HIVE expand its business and diversify into Bitcoin mining (HIVE is currently focused on mining the leading alt-coin, Ethereum).
HIVE Blockchain closed at $3.98 Monday on volume of 11 million shares. The company has a market cap of approximately $1 billion.
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Tommy Humphreys is a web developer and financial publisher. Nothing in this article should be construed as a solicitation to buy or sell any securities mentioned anywhere in this newsletter. This article is intended for informational and entertainment purposes only!
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In many cases Tommy Humphreys owns securities in the companies he features, and that is the case with respect to HIVE Blockchain Technologies (“HIVE”). For those reasons, please be aware that Tommy Humphreys can be considered extremely biased in regards to the companies he writes about and features in his newsletters, including HIVE. Because Tommy Humphreys owns shares of HIVE and stock options, there is a major conflict of interest involved that does influence his perspective on HIVE. This is why you should conduct extensive due diligence as well as seek the advice of your financial advisor and a registered broker-dealer before investing in any securities. Tommy Humphreys may purchase more shares of HIVE for the purpose of selling them for his own profit and will buy or sell at any time without notice to anyone, including readers of this newsletter.
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