Although cryptocurrencies represent one of the most paradigm-shifting asset classes, their evolution nevertheless sparks great debate. A groundbreaking innovation, Bitcoin and the underlying blockchain technology finally solved the double-spend problem of digital currencies, that is, an inherent mechanism to prevent the copying and pasting of electronically minted coins and tokens. By decoupling supply and demand dynamics from centralized authorities to a network of distributed actors, Bitcoin could organically maintain its valuation integrity.
However, the decentralization model of cryptocurrencies does not necessarily mean that digital assets operate under their own independent ethos. Rather, the authority of determining the supply flow of cryptos rests under a community of miners — entities that verify transactional data that eventually gets recorded on the underlying immutable blockchain. In return for their troubles (i.e., energy expenditure), miners receive crypto coins or tokens.
Still, the core issue is that these digital assets’ valuation is tied to pure investor demand, contributing to the sector’s hallmark wild volatility. Yet crypto miners incur real energy costs to mint virtual currencies that could in theory drop to zero — a situation not entirely dissimilar to wildcat money prior to the National Bank Act.
But Rhodium Enterprises Inc. may provide the solution with its sustainability-oriented Bitcoin mining model, thus drawing substantial attention to its upcoming initial public offering (IPO). Here’s the breakdown on this new listing.
What Is Rhodium Enterprises?
Billed as an industrial-scale digital asset technology company leveraging its proprietary technology to mine Bitcoin, Rhodium Enterprises aims to distinguish itself from the litany of other blockchain specialists. Its strategy involves creating innovative technologies to “be the most sustainable and cost-efficient producer of Bitcoin in the industry.”
Per its prospectus, Rhodium states that it can achieve this lofty goal through its “fully integrated infrastructure platform, access to sustainable and low-cost power and directly owning and operating a majority of the components” of its customized mining sites. Further, Rhodium’s “flagship liquid-cooling system, efficiency optimization software and end-to-end management software” could potentially facilitate a profitability advantage over the competition.
When Is the Rhodium Enterprises IPO Date?
Being the first time a private enterprise releases its shares for public investment — typically on a major exchange like the Nasdaq or New York Stock Exchange — an IPO brings with it both opportunity and risk. Primarily, the allure of the unknown attracts speculators, who reason that they could be sitting on the next big thing. Simultaneously, this variable is also the potential threat.
Waterfalls look majestic up until the point you realize you’re about to go over one. Therefore, no investment in Rhodium Enterprises should be taken lightly.
That said, those who are considering participating on Rhodium’s listing will need to think quickly. The company will likely ink its name on the IPO calendar on the week of Jan. 17. Per various reports, Rhodium may price its deal on Jan. 19, with shares trading the following day on the Nasdaq under the ticker symbol RHDM.
Representing one of the significant signs that the hot market for public debuts has not yet lost its fervor, Rhodium plans to raise $100 million through the distribution of 7.7 million shares. Management projects that the per-share range will fall between $12 and $14. At the midpoint of this estimated pricing spectrum, the Bitcoin miner will command a market value of $1.6 billion.
B. Riley Financial Inc. (NASDAQ: RILY) and Cowen Inc. (NASDAQ: COWN) are the joint bookrunners for the IPO.
Among the most curiously timed debuts, RHDM stock will join the fray under an ambiguous framework. On one hand, 2021 represented a banner year for IPOs, which delivered a total valuation of over $301 billion. Specific to crypto-mining endeavors, Bitcoin has been a revelation, soaring from just under $20,000 in mid-December 2020 to over $67,000 in early November 2021.
But the question remains, how long can this speculative fervor last? While the number of recent new listings remain robust, an increasing number of IPOs have lost money for early traders. And cryptos themselves have dropped heavily against their highs, with Bitcoin at time of writing struggling to gain traction around the $43,000 level.
The message couldn’t be clearer. No matter your opinion about Bitcoin, you must perform extreme due diligence with RHDM stock.
Rhodium Enterprises Financial History
Unlike many other businesses, Rhodium Enterprises financial performance substantially depends on the whims of its underlying asset. That’s no knock against RHDM stock — it’s just the nature of the crypto beast. Therefore, you must approach the mining firm with a critical eye.
According to its latest amended version of its Form S-1 filing with the U.S. Securities and Exchange Commission (SEC), Rhodium rang up net revenue of $82 million for the nine months ending Sept. 30, 2021. Backing out various costs and expenses, the company posted an impressive net income of $46.2 million. Nevertheless, prospective investors of RHDM stock must ponder how sustainable these figures are should Bitcoin incur a corrective period throughout 2022.
From simple deduction against prior Form S-1 data, below is the breakdown of revenue and net income from the first calendar quarter to the third.
- Q1 2021: Revenue of $21.86 million and net income of $13.97 million.
- Q2 2021: Revenue of $26.32 million and net income of $938,000.
- Q3 2021: Revenue of $33.92 million and net income of $31.24 million.
Naturally, many investors will key in on Q3 2021’s blistering net income of $31.24 million, with the largest contributor being the realized gain on sale of digital assets line item. During this period, Bitcoin saw its price drop to slightly below $30,000 to hitting nearly $53,000 before incurring a brief correction.
On the other hand, Q2’s net income tally was relatively unimpressive. Sure enough, this period corresponds with the time when Bitcoin dropped from its then-record price of nearly $64,000 to around $32,000. In other words, Rhodium Enterprises appears beholden to whatever cards the Bitcoin market hands the mining firm.
To be sure, when momentum carries the BTC coin to soaring heights, fundamentally sound miners often tag along for the ride. But down periods — even temporary corrections within the broader context of a bull market — impose a serious dent on financial performance. Worse yet, crypto miners have failed to distinguish themselves from myriad other competitors aside from commoditization metrics such as lower cost per coin minted.
However, even superior cost profiles might not spare RHDM stock if Bitcoin slips into a bear market.
Rhodium Enterprises Potential
For anyone familiar with the life-changing returns of crypto-based investments, RHDM stock enjoys substantial speculative potential. For instance, a similar company, Marathon Digital Holdings Inc. (NASDAQ: MARA), was a literal penny stock throughout much of 2020. But then the Bitcoin rally happened, and it eventually saw shares hit over $76.
Put down enough money, and you could be looking at a type of trade that would have you sipping margaritas in an exotic resort town rather than dreading the next boring conference call with your work colleagues.
However, interested investors must be aware that Bitcoin giveth and Bitcoin taketh away. The much-celebrated Marathon Digital is now one of the worst-performing stocks, hemorrhaging about 62% of its market value since its Nov. 9 closing high of last year.
Finally, it’s extremely difficult to have confidence in risk-on assets now that the Federal Reserve is signaling an aggressively hawkish monetary policy. Any prospective participants must exercise strict money management as this IPO can go either way.
How to Buy Rhodium Enterprises IPO (RHDM) Stock
Should you wish to acquire Rhodium shares at the open, you’ll need to know how to buy stocks. Below is a quick reference guide.
Step 1: Pick a brokerage.
Since the best brokers compete on similar financial incentives, take time to figure out which platforms suit your needs.
Step 2: Decide how many shares you want.
IPOs are risky, especially ones involving Bitcoin. Therefore, it’s best to engage with a balanced share count.
Step 3: Choose your order type.
Before trading, learn these market concepts.
- Bid: The buyer’s best offer for a stock.
- Ask: The seller’s lowest acceptable price.
- Spread: The difference between the bid-ask price, the spread indicates market risk as this is also the profit margin for market makers.
- Limit order: Buy or sell requests at a predetermined price, limit orders provide transparency but no execution guarantees.
- Market order: Market orders guarantee fulfillment but only at the current rate.
- Stop-loss order: Stop-loss orders automatically exit your position at either a predetermined price or anything lower.
- Stop-limit order: Stop-limit orders only leave positions at a specified price, but they also carry non-fulfillment risks.
Step 4: Execute your trade.
Follow these steps to execute a market order:
- Select your action type (buy or sell).
- Enter the shares you want to acquire (or sell).
- Hit the Buy (or Sell) button.
Follow the same sequence for limit orders (but include your execution price).
RHDM Restrictions for Retail Investors
Review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons before participating in an IPO. Don’t engage if you have privileged information.
Although details about RHDM’s pre-IPO access were not available at publication time, rumors suggest that Robinhood’s IPO Access platform may accept applications.
Crypt or Crypto?
Few IPOs have presented such a binary proposition as RHDM stock. While Bitcoin has demonstrated its remarkable upside potential throughout 2021, what goes up usually falls back down. And when circumstances sour in the virtual currency segment, they can be wholly unforgiving.
Disclosure: The author held a long position in Bitcoin at time of publication.
About Joshua Enomoto
His distinct writing style of distilling convoluted data into relatable and compelling narratives has earned him recognition among several investment-related publications.