Deal with Trump-backed American Bitcoin makes 'sound strategic sense' for Hut 8, analyst says
Quick Take
- The deal is expected to reduce Hut 8’s capital costs and boost its valuation, with an analyst highlighting its potential as an undervalued stock.
- American Bitcoin plans to expand its mining capacity fivefold, while Hut 8 transitions toward a low-volatility business model with steady fiat revenue streams.
U.S.-based public traded Bitcoin mining company Hut 8 this week announced an 80% stake in the Trump-backed American Data Centers, now rebranded as bitcoin miner American Bitcoin. The long-term vision, according to Hut 8 CEO Asher Genoot, is for American Bitcoin to be "two sister publicly traded companies" combined under one vertically integrated firm.
American Bitcoin's most prominent investors include President Donald Trump's eldest sons, Eric Trump and Donald Trump, Jr.
The upshot is that Hut 8 (ticker HUT) will be able to generate recurring, fiat-based revenue while reducing its overall cost of capital, a Benchmark analyst said. These factors will ultimately contribute to a higher valuation multiple for its stock.
"We believe the American Bitcoin transaction makes sound strategic sense for the company given its overarching vision of operating as an integrated energy and digital infrastructure provider rather than as just a bitcoin mining firm," Benchmark equity analyst Mark Palmer wrote in a note to clients. "We view HUT’s shares as very undervalued, especially considering its multiple drivers of upside, and we note that its bitcoin holdings represent almost 71% of its market capitalization."
Hut 8 will initially retain its Bitcoin treasury — it holds 10,237 BTC as of March 6, making it one of the largest corporate holders — while using those holdings strategically. "Management said the company would sell a portion of its bitcoins to fund the development of energy infrastructure if and when it would make sense for it to do so, adding that it would continue to put its holdings to work using derivatives," Palmer wrote.
Hut 8's management explained that the transaction would transform the company into a low-volatility energy and digital infrastructure firm while maintaining exposure to Bitcoin’s price, Palmer noted. The deal aims to lower Hut 8's overall cost of capital and improve financial alignment with American Bitcoin.
Meanwhile, American Bitcoin plans to expand its self-mining capacity from ~10 EH/s to over 50 EH/s while improving energy efficiency, with Hut 8 potentially hosting mining operations at multiple sites.
Hut 8's stock popped about 6% on the news and traded around $13.33 per share at publication time. Shares are down nearly 40% from post-election highs. Benchmark reiterated its "buy" rating on Hut 8 while lowering the price target from $41 to $33.
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