Bitcoin mining company CleanSpark sees shares plummet after changes to sales agreement

In the late trading hours of Thursday, shares of Bitcoin miner CleanSpark experienced a significant 10% drop after the company announced a change to its at-the-market (ATM) sales agreement, which now allows it to sell up to $800 million of its shares.

This adjustment follows an original $500 million agreement with investment bank HC Wainwright & Co, entered into on January 5, 2024, allowing CleanSpark to periodically offer shares of common stock at just $0.001 per share, as disclosed in an SEC filing.

Share dilution is a common method for additional financing

The equity dilution strategy is a common method among listed companies to obtain additional financing. CleanSpark is not alone in this approach; other Bitcoin miners such as Riot Platforms and Marathon Digital Holdings have entered into similar ATM deals, with values ​​reaching $750 million in August and October respectively.

CleanSpark’s market capitalization, which currently stands at $4.2 billion, would be diluted by 19% by issuing $800 million of shares. CLSK stock, which started the day at $23.20, saw a 16% decline to $19.1 in after-hours trading, including an 8.2% drop during regular trading hours, according to Google Finance data.

CleanSpark prepares for Bitcoin halving

Despite this, CLSK stock has seen an impressive 95% rise in 2024 and a 685% increase over the last twelve months. CleanSpark is preparing for the upcoming Bitcoin halving, expected on April 20, which will see Bitcoin mining rewards halved from 6.25 BTC ($441,000) to 3.125 BTC ($220,500).

A CoinShares research report dated January 12 shows that CleanSpark has the lowest cost to mine one Bitcoin after the halving, at $26,900. The company expects its hash rate to double in the first half of 2024, thanks to a recent deal to purchase four new mining facilities in Mississippi worth $19.8 million, which will immediately give the company 2.4 exahashes per second (EH /s) yields.

It has also been agreed to purchase an additional mining facility in Dalton, Georgia, for $6.9 million, which will contribute 0.8 EH/s. This facility is currently under construction and is expected to be operational in April 2024.