Pivots are common for startups, which allow for a better product-market fit. They are an essential part of the innovation process. But by the time a company is trading on major exchange like the NYSE or NASDAQ, the focus is usually clear cut. But interestingly enough, Marathon Patent Group (NASDAQ:MARA) is an exception. Because of this. MARA stock has been a roller coaster for the past few years.
Back in 2016, the shares fetched about $47. However, as of now, MARA is trading for $1.80. Then again, for this year, the stock price had been as high $5.25 and as low as 35 cents a share!
MARA got its start in early 2010 and was incorporated In Nevada. At the time, the company was called American Strategic Minerals Corporation and was focused on the exploration of uranium and vanadium. But when this did not work out, the company invested in California real estate in 2012. Oh, and then a year later, this business was shutdown and the company entered the IP (Intellectual Property) licensing industry and changed the name of the entity to Marathon Paten Group. In about five years, the company would merge with Global Bit Venture and become a crypto miner. Unfortunately, this move has not seen much success either.
The Company’s New Business
The company currently uses sophisticated – and expensive – hardware to create bitcoins. MARA also has plans to move into other cryptocurrencies, like Ethereum. Keep in mind that they all rely on various types of complex blockchains, which are decentralized digital ledgers that can securely record peer-to-peer transactions. The technology has become critical, as seen with the adoption from major companies like IBM (NYSE:IBM), DocuSign (NASDAQ:DOCU) and NVIDIA (NASDAQ:NVDA).
But unfortunately, the crypto mining business has a myriad of challenges. First of all, there is uncertainty regarding the regulation, which could lead to higher costs and lower returns. Then there are the issues with financial accounting for blockchain transactions and the tax obligations.
Next, crypto mining is far from cheap. A miner must pay hefty capital costs for the equipment (note that an ASIC system can easily cost $2,500. Moreover, the equipment will wear out in a couple years because of the heavy usage. In other words, there are ongoing demands to purchase hardware.
And to run these systems, there is a need to purchase large amounts of electricity. In fact, the costs can easily come to about three-quarters of the value of bitcoin mined. This is why miners are usually located in areas like China where power sources are more affordable. However, in the case of MARA, its operations are in North America, which has certainly been a disadvantage.
Bottom Line On MARA Stock
Along with most other markets this year, bitcoin has been in the bull mode. Since March, the price has gone from $5,000 to over $10,000.
And yes, this has benefited MARA. In the latest quarterly report, revenues jumped by 157% to $592,487. However, the company continues to post losses. The fact is that the company does not have much scale in its operations. So in the quarter, the operating loss came to $1.1 million.
To help shore up the balance sheet, MARA was able to close a secondary offering of stock. The amount was roughly $6.9 million.
While this will certainly be helpful, it is still a modest amount – at least compared to the capital requirements. Besides, bitcoin can be extremely volatile. If there is another dive, it could quickly burn the cash balance.
So yes, when it comes to MARA stock, there will probably be short-term trading opportunities. The shares can easily spike, as the market capitalization is only about $59 million. But if you have a longer-term perspective, then you may want to avoid this one.
Tom Taulli (@ttaulli) is an advisor/board member for startups and author of various books and online courses about technology, including Artificial Intelligence Basics, The Robotic Process Automation Handbook and Learn Python Super Fast. He is also the founder of WebIPO, which was one of the first platforms for public offerings during the 1990s.
On the date of publication, Tom Taulli did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.