From dilution to cash flow: Is BitMine stock worth buying now?

BitMine’s stock price has rebounded over the past few days, hovering near its highest level in more than a month. BMNR has surged 32% from its year-to-date low, with the recovery gaining momentum as investors anticipate the company’s transition from a cash-burning business into a potential free cash flow machine.

BitMine has continued to accumulate ETH

Tom Lee’s BitMine stock has done relatively well in the past few weeks, helped by Ethereum’s resilience. Ethereum price jumped to $1,933 today, its highest level since June 2nd. 

Data shows that spot Ethereum ETF inflows have continued rising. These funds added $38 million in assets on Monday, bringing this month’s net inflows to $271 million. The ongoing ETF inflows is a sign that investors are starting their accumulation. 

BitMine has continued buying ETH tokens. It now holds tokens worth over $11.5 billion, with its ETH holdings rising to over 5.77 million. CoinGecko data shows that ETH has a circulating supply of 120 million coins.

BitMine’s goal is to hold 5% of ETH in circulation, meaning that the goal is to have 6 million coins. As such, if the accumulation process continues, it means that the company will conclude its purchases in August or September.

The company has a relatively unique business model since it is accumulating ETH, a token that pays investors through staking. Its goal is to stake all the 6 million coins and start making a monthly return. 

Free cash flow machine

As such, BitMine will now transition from being a highly dilutive company into a cash flow machine. In terms of dilution, it has boosted its outstanding shares from about 2 million in May last year to over 603 million today. It did this to get adequate cash to buy its ETH coins and invest in its moonshoots. 

Therefore, after ending its Ethereum buying, BitMine will start minting cash. For one, Ethereum now has a staking yield of 3%, meaning that the company will be making about 180,000 coins a year. 

The value of these coins will depend on the underlying ETH price. At the current price, these coins would be worth over $347 million. If it jumps and retests its all-time high of $4,953, these coins will be worth close to $900 million.

BitMine has an exciting cost structure. It has less than ten employees and has no debt in its balance sheet. Its biggest cost is the dividends to the BMNP holders, which stand at less than $40 million a year. 

This means that the company will start to use its staking revenue to paying back dividends, repurchasing its stock, or making venture investments.

BitMine’s business model is different from Strategy, which has spent billions of dollars accumulating Bitcoin, an asset that does not produce any income.

BMNR stock price analysis

BitMine stock chart | Source: TradingView

The daily chart shows that the BMNR stock has bounced back in the past few days. It has soared from a low of $12.90 in June to $16.63 today. It has already moved slightly above the 25-day Exponential Moving Average. 

The stock has already jumped above the 25-day Exponential Moving Average (EMA). It is also nearing the important resistance level of $17.80, its lowest level in February and March this year. A move above that level will point to more gains, potentially to the psychological level of $20. It may then continue its strong uptrend over time.