To say 2018 was a painful year for MGT Capital Investments Inc (OTCMKTS:MGTI) is an understatement. As we said back in September, short sellers remain in firm control, in line with sentiments in the broader cryptocurrency marketplace. This was back when MGTI was trading at $.23 a share. The stock eventually fell to as low as $.028 before bouncing to its current price of $.068 a share. Many are now asking if MGTI will recover this year or if there’s more pain to be had.
First up, a little background info for those that are not familiar with MGTI. The company has facilities in Washington, Colorado, and Ohio ranking MGTI as one of the largest U.S. based Bitcoin miners. MGTI oversees the operation of approximately 6,250 Bitmain S9 miners, and 50 GPU-based Ethereum mining rigs. Further, the Company continues to execute on an expansion model to secure low-cost power and grow its crypto assets materially.
Second, there’s a lot of bad news surrounding MGTI, including an SEC lawsuit and various class action lawsuits. On September 7, 2018, the U.S. Securities and Exchange Commission (“SEC”) filed a lawsuit against a former officer of MGT as well as other individuals and corporations, alleging violations of the federal securities laws. The SEC complaint alleges that defendants were participants in “highly profitable ‘pump-and-dump’ schemes…from 2013 through 2018” in the stock of three public companies, including MGT. The SEC complaint further alleges that the schemes “enrich[ed] Defendants by millions of dollars, [and] left retail investors holding virtually worthless shares.”
Bitcoin Bear Market
The biggest impact on MGTI has been the Bitcoin bear market. The current Bitcoin price is $3600, which is below the company’s breakeven price of $4,000. According to the company:
Presently, the network requires the computing power of 60 Bitmain S9 miners to mine one Bitcoin per month. On a per unit basis, the Company spends about $65 per miner per month, which is about equal to the current price of $4,000 per BTC.
MGTI has moved its mining operations from Sweden to Colorado. MGTI now has approximately 500 Bitmain S9 miners operating in central Washington state, 3,000 S9’s currently being set up in Colorado, and 2,750 S’9s (including roughly 1,900 miners owned by third-party investors) in Ohio being set up as well.
Bitcoin Low In?
The success or failure of MGTI going forward is going to depend on the price of Bitcoin. If the low is in and we see a recovery above $4k, MGTI will be in great shape as many miners have exited the business. Management remains optimistic that interplay of Difficulty and Price will continue to move in the company’s favor in the next several months. Furthermore, management believes that as one of the ‘last men standing,’ MGTI is positioned to be a consolidator in the mining industry.
Currently trading with a market cap of just $8 million, MGTI is one of the few pure-plays for investors looking for exposure to Bitcoin without actually buying Bitcoin. As goes the price of Bitcoin so goes the share price of MGTI. When you consider that MGTI has a liquidation value of $11.8 million, MGTI might be a worthwhile punt at current levels.
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Disclosure: We have no position in MGTI and have not been compensated for this article.
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