Bitcoin mining company Hut 8 Corp. witnessed a significant decline in its share price, plummeting over 23% on January 18, 2024. This sharp drop occurred when the firm celebrated its listing on the Nasdaq stock exchange by ringing the opening bell.
Concurrently, a controversial report from activist short-selling firm JCapital Research cast a shadow over the company, alleging that insiders were gearing up for a “pump and dump” strategy.
The dramatic decline in Hut 8’s share price unfolded after hours of trading, with shares plunging from $9.30 to $7.10. This downward spiral coincided with releasing a report titled “The Coming HUT Pump and Dump” by JCapital Research. The report raised red flags regarding Hut 8’s merger with U.S. Bitcoin Corp (USBTC) on November 30.
Doubts surrounding the merger
JCapital Research, known for its short-side bias, scrutinized the $725 million merger deal, alleging that USBTC had a history of legal troubles. The report pointed out that USBTC had defaulted on a loan and faced government fines, one for securities violations.
Furthermore, the report drew attention to USBTC’s CEO, Michael Ho, who now serves as Hut’s chief strategy officer. It claimed that Ho concealed his relationship with stock promoters known as the Honig Group, previously accused by the SEC of engaging in “pump and dump” and fraudulent schemes. The Honig Group ultimately settled charges and agreed to a ban from trading penny stocks.
In its conclusion, JCapital Research expressed strong concerns, suggesting that Hut 8 shareholders might be exposed to the risk of an over-leveraged pump-and-dump strategy, leaving them holding shares in an inefficient Bitcoin miner, unprofitable even at Bitcoin prices exceeding $60,000.
While these allegations have triggered panic selling among some investors, doubts persist about the accuracy of the short report. Many in the crypto community, such as Crypto X user Cantonese Cat, have voiced skepticism, highlighting the inability to verify the claims and the possibility of a market-driven panic response.
Hut 8’s Nasdaq debut marred by uncertainty
Hut 8’s listing on the Nasdaq stock exchange was intended to celebrate the successful completion of its all-stock merger with the U.S. Data Mining Group and USBTC. However, the timing of the JCapital Research report cast a shadow over what should have been a momentous occasion for the company.
Notably, Hut 8 stands out from other crypto miners as it has managed to maintain its self-mined Bitcoin holdings despite market challenges faced by industry peers. While other companies, such as Core Scientific and Riot Blockchain, have had to sell portions of their Bitcoin holdings to navigate market volatility, Hut 8 has continued to amass a substantial reserve.
As per a January 5 statement, Hut 8 reported mining 453 Bitcoin in December, boosting its total Bitcoin reserves to an impressive 9,195 BTC. This stash is valued at approximately $377 million at current market prices, highlighting the company’s dedication to accumulating digital assets as part of its business strategy.
