ASICMiner, one of the first companies to successfully deploy bitcoin ASIC mining hardware in 2013, has seen its share price double over the last month. The gains come ahead of the expected Jan 20 tapeout date for ASICMiner’s 3rd generation hardware indicated by the companies CEO in a December announcement. As multiple consumer ASIC companies prepare to ship inventory and private mining operations increase in scale, often with equal or superior hardware, meeting schedule expectations will be paramount to ASICMiner’s future.
As one of the first successful ASIC producers, AM was able to maintain a significant hardware advantage through mid-2013, driving the company’s profitability both in mining operations and consumer sales. As 2013 progressed and competitors began to deploy 55nm and then 28nm chips, compared with AM’s Gen 1 130nm hardware, AM’s share of the network plummeted from upwards of 20% to less than 1%.
Accordingly, the company’s efforts to develop next generation hardware has been watched closely. With plans for Gen 2 chips foregone to focus on Gen 3 production, ASICMiner has significant shareholder value depending on the 40nm Gen 3s hitting the network quickly. Even if tapeout (when the designer sends plans out for manufacture) meets Jan 20 expectations, initial chip delivery is generally estimated to take an additional two months. In such a scenario, the first Gen 3s won’t hit AM’s immersion cooling units until the end of the 1st quarter.
Even with the expected date approaching, traders looking to front run the tapeout announcement have no official news from the company since the original December post to explain the latest price move. There is, however, the fact that Cointerra and Hashfast have both pushed back the delivery date of their 28nm rig deliveries, meaning competitive network growth has been somewhat stemmed.
Also contributing to the notion that the recent market bid is driven by Gen 3 delivery expectations is the dramatic fall in dividend yield. ASICMiner shares have historically maintained a dividend yield averaging around 30%. In the last few weeks the dividend yield has fallen to 9%. Generally, lower dividend yields indicate greater value attributed to future growth over near-term returns. In the case of ASICMiner, that can only mean delivery of Gen 3.
Worth noting is the relative illiquidity of ASICMiner equity. Market value is generally pegged to the latest trade on Havelock, the last remaining mainstream exchange for bitcoin securities. Havelock has only seen two days with trading volume greater than 500 shares since the beginning of December (of 400,000 total shares outstanding), meaning large holders would likely see a different rate for sales or auctions of significant blocks.
With an announcement of tapeout expected after almost six weeks of silence from the company, the potential for notable price moves is significant. Doubt of the timeline being met is almost certainly priced in, meaning upside potential if achieved. Similarly, each day that passes without definitive and communicated progress towards the deployment of Gen 3 will likely weigh heavily on equity prices as the rest of bitcoin mining network continues to grow exponentially.
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