As bitcoin, ethereum and other cryptocurrencies get increasing attention from investors, Wall Street and its traditional banks continue to adjust to the shift. Catch up on this week's top stories highlighting the intersection of these old guard and new school areas of finance with this recap compiled by The Fly.
BITCOIN MINER RHODIUM TO MERGE WITH SILVERSUN: SilverSun Technologies (SSNT) announced Thursday that it has entered into a definitive agreement and plan of merger with Rhodium Enterprises, an industrial-scale digital asset technology company utilizing proprietary technologies to mine bitcoin. "Rhodium is one of the largest bitcoin miners in the United States. Rhodium designs and develops its large-scale, liquid cooling systems and proprietary software to optimize the performance, efficiency, and control of its miners, infrastructure, and operations. Rhodium's flagship liquid cooling technology helps keep miners online and extracts heat which could otherwise lead to equipment damage or failure. Rhodium's proprietary software enables it to make quicker, data-informed decisions, securely and rapidly put miners online, and more effectively manage temperature and energy," the companies stated. Upon the consummation of the business combination, each holder of an outstanding share of SilverSun common stock will receive a cash dividend of at least $1.50 per share, which equates to approximately $8.5M in the aggregate and a stock dividend of one share of SWK Technologies Holdings, a recently formed subsidiary of SilverSun. It is expected that the capital structure of HoldCo will roughly approximate the current capital structure of SilverSun. Following the consummation of the business combination, the business of the subsidiaries will continue to be operated consistent with past practices. The current management and Board of Directors of SilverSun, including Mark Meller, the CEO of both SilverSun and SWK, will continue in their current roles at both HoldCo and the Subsidiaries. HoldCo will apply for public listing and the shares distributed in the stock dividend will be registered pursuant to a Form 10 that will be filed by HoldCo with the United States Securities and Exchange Commission. The shares of SilverSun's common stock to be retained by the current SilverSun stockholders following the consummation of the business combination will collectively represent approximately 3.2% of SilverSun's pro forma common equity ownership. The proposed business combination is expected to close by year-end of 2022.
ROBINHOOD, CIRCLE PARTNER FOR USDC: On the heels of the USD Coin listing, Robinhood (HOOD) announced Wednesday a new strategic partnership with Circle that will allow customers to buy and sell USDC on Robinhood, access exclusive in-app educational modules, earn rewards, improve settlement efficiency, and more. The deal also allows customers to transfer and use USDC on the new Robinhood Wallet. The addition of USDC brings the total number of assets available to buy and sell through Robinhood Crypto to 17 and is the first stablecoin listed on the app. Robinhood supports withdrawals of USDC on ethereum and polygon and is now also available to use & transfer on the Robinhood Wallet, which launched in beta to 10,000 iOS customers on the waitlist. The company said, “USDC is issued by Circle and is a fast, safe, and efficient way to send, spend, and exchange money, with more than $50B in circulation. Billions of USDC change hands daily, and because USDC reserves are fully backed by cash and short-dated U.S. treasuries, every USDC is redeemable 1:1 for U.S. dollars. Circle is a licensed money transmitter in many states and conducts annual audits of USDC reserves, which are also attested monthly.”
COINBASE INITIATED WITH UNDERWEIGHT: Wells Fargo analyst Jeff Cantwell initiated coverage of Coinbase (COIN) on Thursday with an Underweight rating and $57 price target. The analyst said a "challenged environment" will keep the company's operating results under pressure. Coinbase faces "several headwinds," as its retail pricing is likely to decline over time given industry dynamics and rising competition from others including Binance and FTX, Cantwell said. Post the "crypto winter," the analyst expects the regulatory and government stances on crypto to become more restrictive to protect customers, creating headwinds to the company's revenue and volume. Cantwell does not see Coinbase being profitable in the coming environment.
Meanwhile on Friday, DA Davidson analyst Christopher Brendler kept a Buy rating and $100 price target on Coinbase and stated that while he is cuttings his FY23 EBITDA estimate by $40M to $351.7M, he is also turning "increasingly bullish". The stock has been pressured by volume declines and misplaced fears of fee compression, but the successful Ethereum merge cements the company's market-leading staking opportunity, the analyst said, adding that he now expects its interest income to "blow away" consensus thanks to rising interest rates and its stablecoin JV with Circle.
BAKKT INITIATED WITH EQUAL WEIGHT: Wells Fargo analyst Jeff Cantwell initiated coverage of Bakkt (BKKT) on Thursday with an Equal Weight rating and $2.50 price target. While the analyst believes the company is well positioned for long-term growth - particularly through its emerging crypto strategy, which should begin to step up more meaningfully in 2023 - he sees the near-term cash burn/lack of company profitability as significant headwinds for investors to be contemplating at this point in the cycle given the weakening macro environment and likelihood of an extended crypto winter. The ownership by parent company IntercontinentalExchange (ICE) also strikes him as an overhang on the public shares that needs to be cleared before feeling more confident about the story. In that context, the analyst sees shares as relatively fairly valued at 2-times his 2023 revenue forecast.
CLEANSPARK EXCEEDS HASHRATE OF 4 EH/S: CleanSpark (CLSK) announced Tuesday its bitcoin mining hashrate has exceeded 4 EH/s, increasing over 30 percent in less than a month. "We are proud to bring so much clean energy-backed infrastructure onto the Bitcoin network, and I am grateful to the operational teams that have made this growth possible," said Zach Bradford, CEO. "Bitcoin mining, when done with an eye toward low-carbon energy sources, can hasten the decarbonization of our economy. No other industry can do this like Bitcoin. In addition to being a technology that we believe will revolutionize our monetary system, Bitcoin is also a technology capable of revolutionizing our energy systems, making them more resilient, abundant, and clean." CleanSpark maintains its 2022 year-end guidance of 5 EH/s and expects to meet its 2023 year-end guidance of 22.4 EH/s.
CRYPTO STOCK PLAYS: Cryptocurrency revenues have been pointed to as reasons to be bullish on Advanced Micro Devices (AMD) and Nvidia (NVDA) in select research. Ideanomics (IDEX), Riot Blockchain (RIOT), Overstock (OSTK), Pareteum (TEUM) and SRAX (SRAX) are other stocks that have been touted, or promoted themselves, as a way to play the crypto theme.
PRICE ACTION: As of time of writing, bitcoin rose about 4% this week to $19,480 in U.S. dollars, according to TradeBlock.
