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MGT Capital Investments Inc. (OTCMKTS:MGTI) Is Doubling Down On Bitcoin

MGT Capital Investments Inc. (OTCMKTS:MGTI) Is Doubling Down On Bitcoin
Written by
Chris Sandburg
Published on
September 5, 2017
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If there is a company that is pushing to capitalize on the rise in the price of bitcoin over the last few months it's MGT Capital Investments Inc. (OTCMKTS:MGTI). A couple of weeks ago, the company announced that it had entered a purchase order with cryptocurrency hardware provider Bitmain Technologies for what was reported to be in excess of 1,000 S9 Antminer Mining rigs.Antminer's are the gold standard mining hardware in the space and 1000 of the units can provide a huge amount of processing power. With shipment expected in mid fourth quarter 2017, MGT reported that it expected monthly revenues from its bitcoin mining operations (once the 1000 units are in place and operational) to generate $1.1 million in monthly revenue, assuming current pricing and difficulty rates.Factoring in operating costs (electricity, etc.) EBITDA from mining operations were reported to be as high as $800,000 per month.Fast forward a couple of weeks and MGT's latest announcement shows that it is not satisfied with sitting still. Against a backdrop of an incredibly fast-moving cryptocurrency space, MGT is pushing to keep up with the industry and, as per the most recent news, has expanded its order with Bitmain to include an extra 500 Antminer rigs. According to the press release that accompanied the update, funds for the larger order were provided in part through the exercise of an option by an existing institutional investor to purchase a $500,000 MGT Convertible Note. MGTI Daily ChartWhat this tells us is that institutional holders are looking to double down on their exposure to bitcoin and the cryptocurrency space and that, just as importantly, MGT is the avenue through which said institutional holders are executing on their double down strategy.So what does the increased order mean for MGT near term?Well, as far as the information we have is concerned, the extra 500 units shouldn't extend the time it's going to take for delivery take place by any discernible margin. What it does mean, however, is that the increase in hashpower brought about by the added unit purchase adds 50% to the numbers detailed above. Not only that, but during the month also subsequent to the initial increased unit announcement, the price of bitcoin is risen and this, of course, contributes to the top line and EBITDA estimates.Based on a September 1 press release, following shipment and setup, and in conjunction with MGT's current rigs in operation, the company's mining operations are expected to generate approximate $1.4 million in monthly revenue, assuming current pricing and difficulty rates. EBITDA on this top line is projected at $1.0 million per month.For a company that has struggled to garner and maintain credibility over the last 12 months, with much of the difficulty rooted in delays and setbacks to its primary cybersecurity development portfolio, the ability to bring in $1 million monthly EBITDA not only lends credibility to operations but also removes a substantial portion of the dilution risk that is generally associated with an exposure to a company in the sort of growth industry.It doesn't remove all dilution risk, of course. MGT is likely going to have to raise money at some point before mid-2018 and when it does, chances are raising is going to be structured in such a way that it adds a chunk of shares to the outstanding base. So long as mining operations remain functional, however, and if the price of bitcoin continues to rise, any dilution should be quickly negated by topline growth.As a final note, we would like to know exactly how much of the mining reward MGT is holding in bitcoin and how much of it the company is converting to fiat. That's what we're on the look out for next.Catch up on the latest MGTI news here. We will be updating our subscribers as soon as we know more. For the latest updates on MGTI, sign up below!Image courtesy of BTC Keychain via FlickrDisclosure: We have no position in MGTI and have not been compensated for this article.

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