Seeking Alpha • Aug 03
Sphere 3D Seeks Bitcoin Miner Ramp As Gryphon Merger Deal Ends
Sphere 3D recently mutually terminated its proposed merger with Gryphon Digital Mining.
Despite this, the company intends to work with Gryphon to ramp up its Bitcoin mining capacity.
Sphere expects to receive delivery of at least 60,000 miners by the end of 2022.
The stock will largely follow the ups and downs of Bitcoin's price; I'm on Hold for ANY until we see miner installation progress.
A Quick Take On Sphere 3D
Sphere 3D (ANY) recently reported its Q1 2022 financial results on May 16, 2022 after mutually agreeing to terminate its proposed merger with Gryphon Digital Mining.
The company is seeking to grow its Bitcoin (BTC-USD) mining operations and will continue to work with Gryphon as it builds out its mining capabilities.
Until we see more data on the firm’s installation of additional miners and on the outlook for a rally in the price of Bitcoin, I’m on Hold for Sphere in the near term.
Sphere 3D Overview
Toronto, Canada based Sphere 3D was founded to provide a range of data center products and services.
It has since changed its focus to become a net carbon neutral Bitcoin and other cryptocurrency mining company with operations in North America.
The firm is headed by Chief Executive Officer Patricia Trompeter, who was previously co-founder and Managing Partner of Ceres Capital Ventures.
The global market for Bitcoin mining is currently in significant flux, with the recent bans on mining in China having caused a large amount of that country's hashpower to exit the network while those operators look for more suitable locations.
Many mining concerns have relocated to the United States, due to its largely predictable regulatory and legal environment and pro-business approaches in a number of states.
The market value for mining depends on the price of Bitcoin, since the majority of value going to the miner is a function of the current Bitcoin reward rate of 6.25 Bitcoin per successfully mined block.
At a price of $25,000 per Bitcoin, the annual mining rewards for the entire industry would be approximately $8.21 billion.
Major industry participants include:
Bitfarms (BITF)
Argo Blockchain (ARBKF)
DMG Blockchain (DMGGF)
Hive Blockchain (HIVE)
Hut 8 Mining (HUT)
HashChain Technology
DPW Holdings
Layer1 Technologies
Riot Blockchain (RIOT)
Marathon Digital Holdings (MARA)
Others
Sphere 3D’s Recent Financial Performance
Total revenue by quarter has been uneven as the firm has operated a relatively small number of mining computers:
5 Quarter Total Revenue (Seeking Alpha)
Gross profit by quarter has followed approximately the same trajectory as that of total revenue:
5 Quarter Gross Profit (Seeking Alpha)
Selling, G&A expenses as a percentage of total revenue by quarter have remained quite high:
5 Quarter Selling, G&A % Of Revenue (Seeking Alpha)
Operating losses have worsened as the firm has pursued capital and expense intensive cryptocurrency mining operations:
5 Quarter Operating Income (Seeking Alpha)
Earnings per share (Diluted) have remained negative as the chart shows below:
5 Quarter Earnings Per Share (Seeking Alpha)
(All data in above charts is GAAP)
In the past 12 months, ANY’s stock price has fallen 80.7% vs. the U.S. S&P 500 index’s drop of around 5.9%, as the chart below indicates:
52-Week Stock Price (TradingView)
Valuation And Other Metrics For Sphere 3D
Below is a table of relevant capitalization and valuation figures for the company:
Measure
Amount
Enterprise Value
$56,690,000
Market Capitalization
$40,000,000
Enterprise Value / Sales [TTM]
13.65
Revenue Growth Rate [TTM]
-13.10%
Operating Cash Flow [TTM]
-$43,500,000
Earnings Per Share (Fully Diluted)
-$0.64
(Source - Seeking Alpha)
Commentary On Sphere 3D
In its last earnings announcement (Source - Seeking Alpha), covering Q1 2022’s results, management highlighted its expansion plans for receiving contracted delivery of 60,000 Antminer S19j Pro mining computers by the end of 2022.
It’s likely the company will receive these miners on time as the overall supply of miners has increased in recent months due to a downturn in Bitcoin price reducing demand in some respects.
At the earnings announcement date (May 16, 2022), the firm had not received its initial test shipment of 12 NM440 Bitcoin miners as part of its 60,000 NM440 order. The company has contract termination rights.Seeking Alpha • Jul 08
Sphere 3D June bitcoin production down 3% sequentially
Sphere 3D (NASDAQ:ANY) produced 12.19 bitcoin, or 0.41 bitcoin daily, in June 2022 - down 3.02% from the 12.57 coins produced in May 2022.
Based on a bitcoin price of $19,889 on June 30, 2022, the equivalent approximate valuation of Sphere 3D's production totaled $242,500 for the month.
The bitcoin miner has produced 55.26 coins, since it began its mining operations in Q122. It held held 49.23 Bitcoin on June 30. This represented a valuation of ~$1.0M based on the bitcoin price on June 30.
Approximately 1,000 S19j Pros miners were deployed as of June 30, delivering a production capacity of about 100 PH/s. Sphere 3D operated at 128 BTC/EH efficiency in the month, with an average 97.0% uptime.
Sphere 3D expects to take delivery of about 4,000 (400 PH/s) new S19j Pros from BitFuFu, the global strategic arm of Bitmain, during July 2022. The miners are scheduled to arrive in multiple shipments and ports in early July.
"August 2022 production should increase significantly due to the addition of approximately 400 PH/s of production to our mining operation between now and the end of August, 2022,", the company stated.
Shares are up 9.5% after-hours.