A Bitcoin Miner In Distress

I'm sure lots of people are interested to invest in companies in the space. Unfortunately, these are hard to find. This company is one of the few pure plays that I know of but I wouldn't want anyone to make the mistake of investing in this thing.

Bitcoinshop is trying to make money by mining bitcoin or possibly other cryptocurrency. That means it puts a bunch of computer equipment in a building and does a lot of computations, so transaction on the blockchain can be verified. In exchange for making the system work, the miner or transaction-verifier gets a tiny reward. It's hard to make money because the computer equipment eats up substantial power and the cost of the consumed electricity doesn't always keep up with the value of the reward. The company lost about $2 million last quarter and it only has $63k in cash left. Its working capital deficiency stands at $5.3 million. Bitcoinshop makes clear in its filings it is looking for additional debt or equity to fund its operations and it may fail to secure it.

Its results are all around poor and leave very little hope the company will be able to quickly turn it around. It needs so much growth to get out of the black hole of expenses it's just not very realistic to happen:

The company also made an investment in mining equipment manufacturer Spoondoolies, which recently went belly up. Most likely this investment is a total loss but I fear the company also heavily relied on Spoondoolies for its equipment. With the company building them gone, it will be hard to get a hold of replacement parts and or support. In addition, Spoondoolies is currently not efficient enough to compete at high power prices. The company claims its power prices are low so it may be able to make them work for as long as they last.

I would have loved to be able to recommend an investment in a nice cheap undervalued bitcoin miner but this isn't it. If there is upside here, it's probably coming through its owners selling the shell. Stay tuned for more bitcoin/cryptocoin related content by following me on Seeking Alpha.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.