Rhodium Enterprises IPO: What You Need to Know

By Duncan Ferris

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Rhodium Enterprises wants to fund the purchase of a shedload of new mining units through its upcoming $100m IPO, but is investing in the company a good idea?

Rhodium Enterprises is aiming to raise $100m from an IPO, with its shares expected to sell between the range of $12 to $14 each. This would value the company at between $1.5bn and $1.75bn. Rhodium Enterprises will be joining the NASDAQ under the ticker code RHDM.

The company wants to use the proceeds to repay outstanding borrowings, construct new sites and for general corporate purposes, such as the purchase of mining units.

What is Rhodium Enterprises?

Rhodium is a Bitcoin (BTC) mining outfit based in Texas, which started its operations in September 2020. The company’s management thinks it can stand out from the crowd courtesy of its integrated technology platform and its eco-friendly ambitions.

The company is run by a leadership team comprised of its four cofounders: CEO Nathan Nichols, COO Chase Blackmon, CTO Cameron Blackmon and CFO Nicholas Cerasuolo.

The company’s overarching aim is to use innovative technologies to become the most sustainable and cost-efficient producer of Bitcoin in the industry.

How does Rhodium Enterprises make money?

Like other Bitcoin miners, Rhodium makes its money by setting thousands of purpose-built mining computers to work out the complex mathematical problems that unlock new units of cryptocurrency.

Looking at its financials, Rhodium achieved net income of $12.8m on revenue of $82.1m during the nine months ended 30 September 2021. This compares to $5.15m in revenue from the nine-month period ended 31 December 2020.

The company began mining Bitcoin in September 2020. From there, Rhodium mined 2,132 Bitcoin over the next 12 months using around 22,600 miners being powered by approximately 80 MW.

The average amount of Bitcoin mined per day by the company has increased throughout its lifespan, rising from 1.04 in the first six months of its operations to 5.7 in the six-month period ended 30 June.

While this shows improvement, the company will need to stay on its toes in order to exceed or even keep up with the slew of other listed crypto miners.

Rhodium’s publicly listed competitors include the likes of Hive Blockchain (NASDAQ: HIVE), Riot Blockchain (NASDAQ: RIOT) and Hut 8 Mining (NASDAQ: HUT).

So, what differentiates Rhodium from its peers? 

How does Rhodium compare to other miners?

One of the edges claimed by Rhodium is its possession of long-term, low-cost contracts in place for its electricity needs, resulting in an electricity cost per bitcoin between July 1, 2021 and September 30, 2021 of approximately $2,145

The company claims to have a competitive advantage over its crypto mining peers due to its design, build, operations and maintenance of industrial scale liquid-cooled bitcoin mining infrastructure. Its founders have spent the last four years working to develop and optimize the company’s liquid-cooling technology.

Rhodium claims that this technology offers it a number of advantages.

For one thing, the company says it extends the mechanical useful life of its miners by 30% to 50% relative to manufacturer specifications based on internal testing. This is because the technology protects the mining equipment from high temperatures, humidity, dust and vibration, which can all lead to damage and failure.

For another, the supposedly superior efficiency of its liquid-cooling technology enables the company to operate in areas which would be off-limits to competitors using air-cooled systems. This has enabled the company to build its presence in Texas, where temperatures are high but there are an abundance of renewable power generation options.

This is central to one of Rhodium’s key aims: to promote the environmentally friendly mining of Bitcoin.

The company describes this as “critical” to the long-term adoption and success of Bitcoin. In this vein, Rhodium has even announced that it intends to reach 100% net carbon neutrality by the end of 2022 through energy considerations and the purchase of carbon offsets. 

Does Rhodium have room to grow?

Rhodium’s bitcoin mining site in Texas has a total capacity of 125 MW and construction has begun on another site in the state, which is expected to be completed at the end of 2022. This second site is expected to provide 225 MW of additional capacity.

This means that, if all goes to plan, the company will achieve 350 MW capability by the end of the current year, almost tripling its current energy usage limits.

As well as increasing its power capabilities, the company has secured more mining units. It says it has received or entered into agreements to purchase a total of approximately 98,800 from its supplier, with around a third of these having arrived before the end of 2021.

This demonstrates the company’s intention to expand rapidly and such expansion looks very realistic, though the success of this will of course be reliant on the continued strength of Bitcoin.

Should you invest in Rhodium Enterprises? 

This could be an appealing investment if you are keen to get in on the crypto mining train but have qualms about the environmental impact of such companies. Rhodium’s ambition to reach net zero by the end of the current year is bold and will be impressive if it is achieved.

Additionally, the company’s liquid-cooling technology is an interesting twist in the tail as it has given Rhodium the ability to seek out cheaper energy costs. It also indicates a tech-savviness that could see the business making some interesting innovations in the future.

However, as things stand it is difficult to recommend a Bitcoin miner in the current environment. Cryptocurrencies and mining stocks have fallen far from the heights they reached in November 2021 and financial markets are currently petrified by potential interest rate increases by the US Federal Reserve.

As such, it’s a challenging time for an IPO, as Rhodium could see its share price take a hit as soon as it joins the market.

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In this article:

Topics:
IPO
Bitcoin
Cryptocurrency
Industries:
Information Technology
Companies:
Riot Blockchain
Hut 8 Mining

Author: Duncan Ferris

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

Duncan Ferris does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the above article.

Duncan Ferris has not been paid to produce this piece by the company or companies mentioned above.

Digitonic Ltd, the owner of ValueTheMarkets.com, does not hold a position or positions in the stock(s) and/or financial instrument(s) mentioned in the above article.

Digitonic Ltd, the owner of ValueTheMarkets.com, has not been paid for the production of this piece by the company or companies mentioned above.

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