BMNR’s surge from a massive Ethereum buy and Peter Thiel’s backing faces a volatile future amid weak fundamentals.

• BitMine Immersion Technologies (BMNR) ran from $3 to $160 in early July after announcing their acquisition of 163,142 Ether (ETH). 
• The stock then fell to $40, before PayPal co-founder Peter Thiel’s Founders Fund disclosed a 9% stake in the company
• It has since rallied back to the $60 range, but can the rally continue?

Peter Thiel’s Stake Sends BMNR Into Overdrive

On July 15th, Peter Thiel’s Founders Fund disclosed that they had acquired a 9.1% stake (5.09 million shares) in BMNR earlier that month. This sent the stock 20-30% higher in after-hours and pre-market trading. This news came after BMNR exploded from $3 in early July to as high as $160, before crashing back down to around $40 on the day of the announcement. 

Since Thiel’s disclosure, the stock has rebounded to its current levels in the $60 range, and recent trade volumes and share price volatility remain sky-high. This has left investors sharply divided; BMNR’s fundamentals do not match it’s price, but recently, companies like Palantir (PLTR) have managed to achieve sustained growth trading far ahead of their fundamentals. 

Borrowing the MicroStrategy Playbook

The core driver of the rally in BMNR is their Ethereum treasury play. On June 30th, the company completed a $250 million private placement to fund the acquisition of 163,142 ETH; that position is now worth almost $500 million. This makes them one of the largest public ETH treasuries, and the third largest crypto treasury globally, trailing only MicroStrategy (MSTR) and Mara Blockchain (MARA subsidiary).

The move into ETH also included appointing FundStrat’s Tom Lee as chairman, signaling ambition and institutional positioning. BMNR is using an asset-light, treasury driven model, almost identical to MicroStrategy’s BTC model, betting on Ethereum value appreciation rather than building mining infrastructure. 

This treasury strategy capitalizes on crypto hype and any increases in the price of major cryptocurrencies. However, it also creates a great deal of volatility, as company valuations become intimately tied to spot crypto prices, which are inherently volatile. 

Why BMNR’s Fundamentals Don’t Match the Hype

With the recent rally, BMNR currently trades at a multi-billion dollar market cap, almost entirely supported by their ETH holdings. Their fundamentals remain frail; revenues are negligible and the company is deeply unprofitable and has been for some time. There’s a reason this was a $3 stock before they started buying ETH. 

The ETH correlation means BMNR will be highly responsive to crypto prices, and any downside for ETH will drag BMNR down along with it. Critics of BMNR warn of a speculative pump-and-dump pattern; regulatory uncertainty and thin fundamentals underpin the inherent risks of tying your company’s valuation to crypto. 

Can Momentum Outrun the Math?

While the fundamentals do not align with the share price, it is not at all uncommon for stocks to outrun their fundamentals in the modern market. If ETH continues to push higher as it has for the last two months, BMNR could spike again; if ETH takes a breather or a tumble, BMNR will fall alongside it. 

While there are numerous risks, there are also no shortage of catalysts; staking revenue updates, additional ETH acquisitions, or another institutional backer could all give BMNR continued upside momentum. However, absent new developments of this sort, BMNR’s valuation is likely to realign with the value of their ETH holdings in the near future. 

Gus Downingis host of the tastylive Network show Risk and Reward. @GainsByGus

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