Why Bitmine Immersion Technologies Soared 46.5% In August

Shares of Bitmine Immersion Technologies (NYSE: BMNR) shot up 46.5% last month, according to data from S&P Global Market Intelligence, making it one of the best-performing stocks in August. It is a holding company for the Ethereum cryptocurrency, which made a nice rebound in August around political sentiment.

Here's why Bitmine Immersion stock was rising, and what investors should do about it today.

Rising price of Ethereum

Bitmine Immersion Technologies is a holding company taken over by investor and market commentator Tom Lee last year, along with other investors, with the stated goal of buying up 5% of the outstanding supply of the Ethereum cryptocurrency. It has done so by selling new shares of common stock, with shares outstanding up 42% in the last twelve months.

There is no debt on the balance sheet, unlike its Bitcoin treasury peer, Strategy, but it recently issued preferred stock that pays a 9.5% annual dividend, similar to debt, since preferred stock has seniority over equity in a liquidation. It is using proceeds from the preferred stock sale to buy more Ethereum and begin repurchasing its common stock, which it hopes will offset some of the prior share dilution.

Overall, in August, Bitmine Immersion soared as Ethereum's price rose. Ethereum is up 33% in the last month, raising Bitmine Immersion's overall net asset value. The share price generally trades in line with this net asset value, with the current stock price of $26 at a slight premium to the $25 net asset value.

Image source: Getty Images.

Time to buy Bitmine Immersion stock?

Buying Bitmine Immersion stock is a bet that Ethereum's price will rise, alongside other smaller cryptocurrency bets and other investments. Right now, cryptocurrency prices are making a bit of a comeback, with gains driven by political tailwinds, inflation worries, and short squeezes on assets like Ethereum and Bitcoin.

The problem is that it is difficult to formulate a long-term thesis about whether a prominent politician mentions cryptocurrencies or whether a short squeeze will occur. Bitmine is a peculiar business in which, instead of actually buying the cryptocurrency itself, an investor bets that management will be able to trade around it to generate more alpha.

Cryptocurrencies have also failed to gain widespread adoption in the economy despite over a decade of promotion by early adopters. Ethereum, as of this moment, is not much more than a trading asset moving on the whims of what investors think. Again, this makes it difficult to formulate a thesis for why someone should own Bitmine Immersion stock.

Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.