H.C. Wainwright Downgrades Stronghold Digital Mining Inc (SDIG) to Neutral

H.C. Wainwright analyst Kevin Dede downgraded Stronghold Digital Mining Inc (NASDAQ: SDIG) from Buy to Neutral.

The analyst comments "When the hunted becomes the hunter—you have to respect the laws of the jungle. Yesterday, Stronghold Digital Mining announced a binding all-stock agreement to be acquired by Canadian-based Bitfarms (BITF; Buy; Collonese) for $175M, including covering roughly $50M in Stronghold debt, at $6.02 per share, a 71% premium to the 90- day average Stronghold share price as of August 16, also representing a premium to our $4 price target and the resounding logic behind our lowered investment rating. On the close, Stronghold becomes owners of 10% of Bitfarms on an issuance of approximately 42M shares, based on our rough estimates, and that percentage does not warrant a Bitfarms' shareholder vote. We do, however, anticipate a strong majority of Stronghold holders casting aye votes given the clearly painted benefits of the combination highlighted on yesterday's call, while we call out Stronghold's capital constraints, and the deal could close early next year. Per our August 15 note here, we made a strong case regarding the value of Stronghold's electrical infrastructure assets, included the same table Stronghold offered at that time on page 2, showcasing access to as much as 955MW, we see lying below market value. On a second look, we were probably overly aggressive in the valuation we accorded on a per MW basis, not that it matters now, where the following rationale might better ballpark value: the active 165MW commanding in the $500,000 per MW range while development MW potential valued far lower. What remains unclear is the approval process for those 647.5W “studied” via PJM as part of the development optionality Stronghold brings, and we suspect the electrical assets and infrastructure might need as much as two years to activate. We are downgrading our investment rating to Neutral and discontinuing a price target."

For an analyst ratings summary and ratings history on Stronghold Digital Mining Inc click here. For more ratings news on Stronghold Digital Mining Inc click here.

Shares of Stronghold Digital Mining Inc closed at $5.34 yesterday.

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