Bitcoin Miner Marathon Reaches Power Deal; Electric car maker Faraday deflates at end of short squeeze

The US stock market is heating up with the scorching summer days. The S&P 500 is up 2.5% this week and 4.7% for the whole of July after sinking into a bear market in the first half. Small-cap stocks have done particularly well in the latest rebound: the Russell 2000 Index gained 3.6% this week.

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Part of this outperformance is due to the Las Vegas-based bitcoin miner Marathon Digital Holdings (MARA). Marathon on Monday announced a deal with energy providers Applied Blockchain, Compute North and other service providers to boost its computing capacity, and its stock has gained 55% this week.

Marathon expects the deal to allow it to meet its goal of generating 23.3 exahashes per second of energy for bitcoin mining, up from 2.1 exahashes at the end of last year and 0 .2 in January 2021. This increase would give him a significant share of the whole. bitcoin mining market, which now generates a total of 193 exahashes per second, according to Blockchain.com.

Applied Blockchain (APLD), Marathon’s largest partner in the deal, will provide Marathon with 90 megawatts of hosting capacity at its mining facility in Texas and at least 110 megawatts at a plant in North Dakota. Dallas-based Applied Blockchain also has a publicly traded stock, and it doubled this week to a market cap of $211 million.

Since Marathon generates revenue through the bitcoin it mines, its stock is correlated with the cryptocurrency and is still down 63% this year. The company’s revenue in 2021 was $150 million, up from just $4.4 million in 2020, and it brought in $51.7 million in the first quarter of this year.

Other big winners this week include the Bloomington, Indiana-based chipmaker SkyWater Technology (SKYT)which announced a partnership with Indiana and Purdue University to build a $1.8 billion factory and grew 67%, and a drug testing company Inotiv (NOTV)which agreed with the United States Department of Justice and the Department of Agriculture to end an animal welfare investigation at a facility in Cumberland, Va., where one of its subsidiaries raised dogs for laboratory tests.

The 10 U.S.-listed stocks with market capitalizations between $300 million and $2 billion have risen the most this week, according to Factset data.

One of the week’s biggest small-cap losers was the Los Angeles-based electric car maker Faraday Future (FFIE), which nearly tripled in a short period of compression in the first two weeks of July, but gave all that gain back with a 65% loss this week, down at least 10% every day. Faraday Future was founded in 2014 as Tesla’s first competitor, but has had a rocky road to market and still hasn’t sold a single car.

When Faraday Future ran out of cash in November 2017, highly leveraged Chinese property developer Evergrande bailed it out with a pledge of $2 billion, including $800 million upfront, for a stake. 45% privileged in society. Evergrande challenged the remainder of the pledge in 2018 in a settlement that reduced its stake to 32%.

Faraday Future went public in a special purpose acquisition company deal in January 2021 – Evergrande still owns 27.9%, according to Factset. It was targeted by short seller J Capital Research in October, prompting its board to set up a committee to investigate allegations of inaccurate disclosures. The investigation found that although Faraday Future told investors ahead of its SPAC deal that it had 14,000 reservations for its FF 91 car, only several hundred of them have been paid, with the rest just signs. of interest, the company disclosed in a filing with the SEC in February. Its stock is down 74% since its IPO.

Faraday expects to finally start production of the FF 91 in the current quarter. It hasn’t publicly disclosed pricing, but Barron’s announced last year that it planned to sell the car for a whopping $180,000.

Companies with a market value between $300 million and $2 billion have fared the worst this week, according to Factset.

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