Bitfarms - a future succes story?

Posted on February 02, 2023

no investment advice.

My approach to assessing new investments can be considered unorthodox. I strive to remove bias and evaluate a company from various perspectives to discover asymmetrical investment opportunities. So, when a Bitcoin mining firm employs a CFO with an MBA from Harvard Business School, that holds an international economics degree from LSE, and with both CPA and CFA qualifications, I want to take an in-depth look.

This company, boasting nearly $180 million in revenue (2021) and assets worth $541 million, with debt standing at approximately $119 million, has an impressive net asset value of $422 million. Despite reducing its total debt significantly in Q4 2022, it is currently valued at just $252 million, suggesting substantial room for growth.

Consistently increasing its Bitcoin production, this company mined 486 BTC, worth around $11.6 million in January alone. It's also expanding its operations with a 12MW facility and plans to employ up to 229MW in total mining operations.

Bitfarms' key personnel appear competent, and the company's strategic planning for the Bitcoin halving in 2024 reflects their profound understanding of the industry's dynamics. They're boldly expanding into new regions to harness cheap, sustainable energy, thereby reinforcing their commitment to their mission - empowering the digital revolution and securing the world's financial economy.

Despite potential dilution concerns, the company's current market cap is undeniable. It holds around 2% of the Bitcoin network, a figure I hope will grow. This investment offers an exciting possibility of free leverage: If the asset's price rises, that's excellent; if it falls, there's an opportunity to acquire more.

Links:

https://bitfarms.com/investors/company-information/executive-team

https://d1io3yog0oux5.cloudfront.net/_14d2085b24b17

7dd970717f66b656fe0/bitfarms/db/862/8290/pdf/BTIF.02.01.23Preso.V1.1.pdf

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People that actually know what they're doing? Based on current growth rates in their mining levels I estimate the company will reach double their production level in autumn of 2024 (Spring 2025 to factor in the halving). The yearly yield may increase (remain constant after halving) due to their increases in infrastructure. Say the company continues its trend then in December of this year it would mine around 800 BTC until EoY. The increase in production is then adjusted to account for the diminished returns and the company would likely be producing 1000-1100 BTC each month for an estimated total of 12000-13200 BTC for the year of 2024.

Predictions for the price of bitcoin can range widely, from optimistic projections of several (hundred) thousand dollars to more conservative estimates in the range of a few hundred dollars. But say the price of one BTC reaches 150k in 2027 then the company would (when selling all generated BTC) realize a yearly revenues of up to $1.9bln. It is more likely that Bitfarms keep some BTC and revenues do not exceed $1bln. Still, a company in this range would be valued north of $9bln. (that is if the company had continue successfully its operations).

There is certainly a risk component to this company and one has to take a leap in the prospects of BTC. It's certainly better than to have my money loose its value doing nothing. The company is issuing more shares and people can contribute with financial resources to build infrastructure. For me that's good enough (no financial advice)

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