Bitmine Announces $1 Billion in Share Buyback Plan, Is BMNR Stock Too Cheap?

Ethereum reserve enterprise Bitmine (stock code BMNR) triggered a selling panic after disclosing early investors' costs and unlock times, with stock prices falling sharply for two consecutive days. The company announced that its board of directors has approved a stock repurchase program to buy back up to $1 billion worth of outstanding common shares. Is Bitmine stepping in to protect the stock price and take the opportunity to buy at a low?

(Are early investors selling again? Examining Bitmine's case to evaluate crypto reserve enterprise valuation)

Bitmine Announces $1 Billion Stock Repurchase Program

Bitmine announced that its board of directors has approved a stock repurchase program to buy back up to $1 billion worth of outstanding common shares. This new stock repurchase program is open-ended, allowing the company to repurchase its shares in the open market and negotiated transactions from time to time.

Bitmine Chairman Tom Lee stated:

On our path to achieving 5% alchemy of ETH, sometimes the best expected return on our capital might be acquiring our own shares.

Tom Lee had just explained the five ways Bitmine increases ETH per share in a previous speech, including "considering acquisition if the company's NAV is close to its Ethereum value", unexpectedly including the operation of their own stock.

(Tom Lee Discusses Ethereum Alchemy, BitMine Drops 12% in Valuation Correction)

Too Much Cash, Stock Price Too Cheap? BMNR Dropped Nearly 9% Yesterday

Companies typically conduct stock buybacks based on the following situations:

• The company has a large amount of idle cash or funds and believes there are no better investment opportunities at the moment
• Management believes the company's stock price is below its true value, thus boosting market confidence and stock price through buybacks
• The company reduces external shareholding percentage through buybacks, reducing the risk of hostile takeovers

Bitmine claims to have over $401.4 million in unallocated cash. As of July 28, the fully diluted common shares issued were 121,739,533. The combined net asset value of cash and cryptocurrencies (net asset value per share) is $22.76. Based on yesterday's closing price of $32, the mNAV is only 1.41 times. Perhaps the company wants to flexibly use its cash, buying back its own stock during a low stock price period, not only to boost investor confidence but also to potentially profit from the price difference.

Bitmine also announced buying more ETH, with total holdings now reaching 625,000 coins. However, after the buyback news was announced last night, its stock price showed no improvement, closing with a significant drop of 8.86%, losing 20% of its market value in two days.