Shares of Stronghold Digital Mining jumped 52% in their first day of trading on Wednesday, as investors show enthusiasm for nascent companies tied to cryptocurrencies.
Trading on the Nasdaq under ticker symbol "SDIG," the Pennsylvania company, which mines bitcoin from waste coal, priced its stock at $19 a share, above the anticipated range of $16 to $18.
The stock closed at $28.90 after climbing as high as $31.90. That gives the company a market cap of about $1.3 billion, based on a fully-diluted share count.
Stronghold debuted as bitcoin hit a fresh all-time high on Wednesday, nearing $67,000. The rally came a day after the launch of the first-ever bitcoin-linked exchange-traded fund. The ProShares Bitcoin Strategy ETF is expected to be the first of many such funds, making bitcoin accessible in a variety of ways to investors with a brokerage account.
Greg Beard, Stronghold's CEO, said the company chose to go public through an IPO rather than going the special purpose acquisition company (SPAC) route, which has been an increasingly popular way to hit the market in the past couple years. Beard touted the credibility that comes with an IPO.
"I think we're getting a lot more interest from investors, because we have been vetted by the SEC the regular way," Beard said. The company said it expected to raise nearly $115 million from the offering.
Stronghold is vying in a competitive market that includes companies like Riot Blockchain, Marathon Digital, and Core Scientific, which will list its stock on the Nasdaq this year as part of a SPAC merger.
Mining from waste coal
The U.S. has exploded on the bitcoin mining scene in the last year, and crypto firms across the country are looking for ways to compete, typically by finding the cheapest source of power available.
When Beijing decided to banish all its crypto miners, Stronghold co-founder Bill Spence saw an opening.
Spence, a native of Pennsylvania, spent the past two decades cleaning up waste coal in his home state. He decided to pivot to bitcoin mining earlier this year to try and capture some of the market share that was up for grabs.
Pennsylvania has been in the coal mining business since the late-1700s. Until 1975, it was legal to put the byproduct from coal mining in piles at the side of the mine mouth. Beard said there are now more than 840 of those piles, some of which are 200-feet deep and look almost like "lunar landscapes."
"They exist everywhere where coal mining existed," said Beard.
Stronghold brings the waste coal from these sites to its two facilities, where it uses fluidized bed boilers to remove toxins. That helps produce power, which is then used to generate electricity for its bitcoin miners.
"We are reclaiming and remediating a legacy problem from decades of coal mining in Pennsylvania," said Beard. "Bitcoin mining is the most economic use of that power today."
When it comes to bitcoin profits, there's not much to report. Beard says the company has only mined a couple hundred bitcoin so far.
"It's not enough to be bragging about quite yet," he said.
Revenue in the first six months only reached $7.9 million, up from $2.2 million in the same period a year earlier. The company lost $3.5 million in the first half of the year.
Beard said that by owning the energy and the mining hardware, Stronghold can generate power at a price that's half the industry average.
"We'll have better margins than everybody else," said Beard. "I think that all the miners will gravitate toward having their own power when they understand that's the direction that the leaders are going."
