With the rise and buzz surrounding Bitcoin and other cryptocurrencies, I have noticed more and more micro-cap companies have begun to deceive investors into thinking their businesses will somehow benefit from the rise in cryptocurrencies. Below I outline two companies that are engaging in this practice.
MGTI Capital Investments, Inc. (OTCQB:MGTI) bills itself as "one of the largest bitcoin miners in the US", yet as little as 12 months ago they considered themselves a leader in the cyber security industry. During their most recent quarter ended 09/30/17 MGTI reported revenues of approximately $.52MM and a net loss of $16MM. MGTI Capital Investments, Inc. (OTCQB:MGTI) has a market-cap north of $100MM as of 12/01/17. Needless to say a company that has quarterly revenues of $.52MM and net losses of $16MM is not worth a single dollar much less $100MM.
Marathon Patent Group, Inc. (NASDAQ:MARA), another micro-cap company cashing in on the fervor surrounding cryptocurrencies, recently announced a deal to acquire Global Bit Ventures to enter the cryptocurrency mining business. MARA currently has quarterly losses of approximately $4MM per quarter. MARA has a market-cap north of $650MM on a fully diluted basis as of 12/01/17. While we still don't know what this company will look like after the acquisition, I estimate the company is trading at about 11.5X book value taking into account the value of the assets acquired.
I don't know whether Bitcoin and other crytocurrencies are overvalued; however, the myriad of companies trying to cash in on the bitcoin ferver are probably severely overvalued if not completely worthless.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.