Topic: Publicly Listed Mining Companies (Read 503 times)

The biggest advantage of buying RIOT/MARA shares over building one's own mining farm is liquidity: ability to enter/exit at any time. Another advantage would be buying in small units instead of spending thousands on each ASIC. Another upside is if one has an expensive power cost or doesn't have the capital to own a mining farm directly. Finally, unlike your own mining operation, you can short shares of MARA/RIOT.

The biggest disadvantage is tax treatment. By buying stock, none of the depreciation benefits on the equipment pass through to the investor. There is no upfront deduction for buying shares. Whereas if you bought the miners yourself, you could write them off in 1 year with Section 179, offsetting the Bitcoin revenue.

Since i have a cheap power cost (7.4¢ 100% uptime, 5.6¢ 80% uptime), I would rather build my own farm than buy corporate miner stock. I need the tax deductions to cancel out the income from my regular job.

You're right that the stringent auditing / disclosure requirements of the SEC, as well as legal liability for false statements, is another benefit of buying the stock

What makes sense in investing in mining company shares instead of buying mining tools?
It works with the same logic and not a different logic in the sense that when problems occur related to Bitcoin, the shares of those companies will perform negatively.

Therefore, the performance of stocks is not as important as the nature of the investment, and it is not different from cryptocurrencies unless you are looking for a little legislative cover that the Securities Commission provides you with.

No. In fact I have a short position on a mining company stock. I hold very little crypto at the moment too and I only own 3 mining rigs.

Well then, this makes my point. The Bitcoin that RIOT holds is not 'cash'. It's an asset that they are HODLing because they think that will give their shareholders the highest return in the future. If you actually look at their balance sheet, it proves that they hold a small amount of cash despite being in a risky industry.

You made my point again. RIOT or MARA don't think buying more equipment is a good investment or they can't expand any faster, they don't think paying a dividend is a good investment, so what else can they do? HODL the Bitcoin that they mined, since the price is already low.

I am located in the United States and RIOT/MARA are U.S. corporations. Businesses don't pay any tax as long as they have enough expenses + depreciation to cancel out the revenue every year. If they issue a dividend, that forces the investors to pay 15% or 20% on that dividend. But if they re-invest into the business or hold onto coins, the investor can decide when to sell and thus when to realize the tax.

There are plenty of schemes that billionaires use to delay tax forever that I can go into. I spent hours discussing these schemes with an accountant. But the simplest formula is: make profit, use all of it to buy miners, make more profit, buy even more miners, etc. The depreciation will always cancel out the profit. The tax savings has a compounding effect. If you want to take out cash, never sell anything. Instead, borrow against the ASICs or the Bitcoin or the stock shares or the real estate!

Buying stocks for growth is always more tax-advantaged than receiving dividends every quarter, even if you re-invested them into the same stock. MARA and RIOT are trying to be high-quality growth stocks, and I think there's nothing wrong with that.

https://www.investopedia.com/articles/basics/11/due-dilligence-on-dividends.asp

I know all about the Michael O'Leary stuff. He is a beast and very funny to listen to. But obviously he became rich by buying more aircraft instead of paying a dividend.

Im guessing from your 'handle' that you have a vested interest in mining companies? Most companies do not sit on piles of cash, (Apple aside), they use it to make the company stronger or use it as collaterel to get loans for the same purpose.

As for taxation, most every listed company has to pay it. I don't know where you live but most of the developed countries have capital gains tax in one form or another, so the mining companies are not doing their investors any favours by holding onto large cash reserves, even if their share value is increasing. In some jurisdictions there are special schemes where investors can get their gains at zero percent, but there are lots of caveats.

Going back to Mr O'Leary and Ryanair, they didn't hold onto their cash but used it to build their airline. It's now the fifth largest airline in the world by passenger numbers.


As an aside, Mr O'Leary used to love winding up his passengers, and would give the press stories (totally untrue) about what he was going to do next with the airline. Two of his best ones were that he was going to charge passengers to use the aircraft toilets, and that he was going to weigh passengers during check in, and charge them extra if they were overweight. You can imagine how that went down. However, O'Leary gave his passengers what he originally promised - cheap fares - and passenger numbers kept on rising, as did his share price.

The whole point of these public Bitcoin mining companies was never to issue a dividend, at least not for the first few years. Marathon & Riot are C corporations with a 21% tax rate, and most of their shareholders will pay a 20% tax rate on dividends. They can return the 'growth' to the shareholders at zero tax, by making use of depreciation and not issuing dividends. If the BTC rises in value, why sell it and pay dividends? Why sell it when the price is so low? Let the shareholders make that decision by selling their shares at the time they want.

As far as I am aware, none of the publicly listed mining concerns have ever given a dividend. If you take any of them they'll boast about how many Bitcoins they have mined, I've always been under the assumption that:

- A listed company doing well will reward it's shareholders loyalty.

- If the company shares are doing well then many shareholders would rather have a higher share price than a (usually) smaller dividend


If I take a well known European Low Cost airline, namely Ryanair, their CEO Michael O'Leary was adamant that the share price was always going to trump an dividend, and he was right - for his shareholders.

The mining companies don't seem to want to share any of their booty, and all of their shares have taken a tanking since xmas. All of them made a fortune out of their IPOs and they are sitting on tons of cash along with their Bitcoins.

Anyone care to guess when they might want to do the right thing by their shareholders?