These Two Companies Show Creative Dealmaking Is Coming To The Market
To investors,
I wrote to this group on October 30th about my goal to become an energy dealer, which led me to work with Asher Genoot and Hut 8. In that letter, I explained that “public market investors usually underestimate the importance of creative dealmaking when evaluating companies because it requires qualitative analysis that doesn’t fit into a spreadsheet.”
This idea of creative dealmaking is particularly important in industries that have lots of volatility. Volatility creates opportunity and the most creative executives are able to capitalize on those opportunities when they are presented.
One of my favorite examples of creative dealmaking is when billionaire Brad Jacobs saw his company’s stock drop more than 25% in December 2018 after a short-seller report was published. The timing of the report was interesting because Jacobs was preparing to make an acquisition, but when he saw his stock drop so significantly, the CEO decided to aggressively buy back his stock.
Brad Jacobs and the company announced $2.5 billion in stock buy backs in about 100 days following the short-seller report. This is a perfect example of a creative dealmaker who capitalized on an unexpected opportunity when it was presented.
It is hard to teach instincts like this.
But a key part of capitalizing on opportunity is having the necessary tools available to you, so you can act quickly and decisively when necessary.
= Hut 8 (Nasdaq | TSX: HUT) =
This perspective on creative dealmaking and preparation through financial tools is why I am intrigued by an announcement that Hut 8 made this morning — the company announced they were reloading their financial toolbox so they are prepared for future opportunities as they present themselves.
First, Hut 8 announced a $500 million ATM program that would allow them to sell shares of their company into the market and raise up to $500 million. Historically, companies have executed on these ATMs when they see an accretive use case for the capital raised.
Second, Hut 8 announced that the board of directors has approved a $250 million stock repurchase program, which will allow the company to use their discretion on when to purchase their own shares. Again, companies historically have done this when they believe their shares are undervalued (this is what Brad Jacobs did in the example earlier).
So how should we interpret this $750 million capital program from Hut 8?
It looks like a creative dealmaker (CEO Asher Genoot) is putting the financial tools in place so he can capitalize on opportunities in the future. There is no industry I am aware of that is more volatile than bitcoin, plus the energy and artificial intelligence components of the business add even more volatility.
Remember, volatility equals opportunity.
We have seen public equities gain value quickly in crypto bull markets (Hut 8 is up 75% in the last month) and these firms tend to go into expansion mode. By having the ability to raise up to $500 million quickly, Hut 8 will have a lot of options at their fingertips, including buying more bitcoin for their balance sheet (they currently hold more than 9,000 bitcoin), buying back their stock, or investing in various operating activities.
= Sol Strategies (CSE: HODL) (OTC Pink: CYFRF) =
There is another deal that got announced this morning that highlights the rise of creative dealmakers. This one comes from Sol Strategies, which is building the Microstrategy of Solana in public markets.
Sol Strategies announced they have signed an LOI to purchase three more validators, which will increase the amount of SOL delegated to Sol Strategies-owned Solana validators to just under 1.5 million Solana (increase of 554,714 SOL). If this deal goes through, Sol Strategies will capture approximately $1.85 million in annual net income.
Most private equity or public market investors have never heard of a validator. They couldn’t explain how these networks operate or why it is valuable to own the validators with staked SOL. But that is the opportunity — for a company like Sol Strategies to be the first mover and acquire as many validators as possible before other companies catch on to the strategy.
Creative dealmaking requires company leadership to have a perspective on where the world is going, coupled with the skill to put the financial tools in place and get deals executed.
We are entering the part of a bull market where optionality is king. Creative dealmakers know it is important to capitalize on these market cycles. And it appears that is exactly what Hut 8 and Sol Strategies are doing.
It will be interesting to watch over the coming months as more dealmaking comes to crypto-related public markets.
Hope you all have a great day. I’ll talk to everyone tomorrow.
-Anthony Pompliano
Founder & CEO, Professional Capital Management
DISCLOSURE: Before I let you go, I want to lay out a few disclosures. It is important to me that you all understand these details.
I personally own Sol Strategies and Hut 8 stock. I am an advisor to both companies and have been working to help them build their companies, navigate the market dynamics, mitigate risks, and create value for shareholders. Some people may look at today’s letter as me talking my book, which has a hint of truth to it, but I think of it much more as I have skin-in-the-game and stand to lose money, time, and reputation if I am wrong in my analysis.
Please don’t take today’s letter as investment advice. Do your own research. You all are adults who can think independently and critically. Stocks are wildly volatile, they can go up and down a lot, you can lose your money investing in the market, and nothing I have written here should be used by you to make investment decisions. There is a longer legal disclaimer at the end of the email you can read as well. No one, including me, is right 100% of the time.
Anthony and Polina Pompliano Talk Bitcoin Bull Market
Polina Pompliano, Author of ‘Hidden Genius’ and Founder of The Profile, and Anthony Pompliano, Author of ‘How To Live An Extraordinary Life’ and CEO of Professional Capital Management, discuss bitcoin having one of its biggest months of all-time, where the price could be headed, risks, how the market is changing now that Donald Trump is coming into office, Elon Musk pay package, Joe Biden pardon of Hunter Biden, impact of tariffs, and more.
Enjoy!
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Is this recent blog excerpt by Mike Fay a canary in Bitcoin's digital coal mine? "Year to date, public company BTC holdings are up 93.4% - but the majority of that is still from MicroStrategy purchases. In fact, MicroStrategy’s share of public BTC holdings has actually gone up over the last 11 months from 69.5% to 76.4%. Private company BTC holdings are down 14% year to date. Perhaps because those businesses don’t benefit from share price manias when buying BTC. That or perhaps holding crypto on the balance sheet is actually quite risky despite what Saylor says."
why all the companies you referring to have such a horrible to remember tickers lol? CYFRF, DEFTF... can you ask them to rename to something more marketable and memorizable ? ))) can't complaint about performance though )