On January 18, Hut 8, a Bitcoin mining company, experienced a significant drop in its share price, plummeting over 23%. This decline occurred on the same day the company celebrated the completion of its merger with US Bitcoin (USBTC) by ringing the opening bell at the Nasdaq. Hut 8’s share price fell from $9.30 to as low as $7.10 during after-hours trading.
The sharp sell-off coincided with the release of a report by activist short-selling firm JCapital Research titled “The Coming HUT Pump and Dump.” The report raised concerns about Hut 8’s merger with USBTC, suggesting that the merger might put Hut 8 investors at risk. JCapital Research, which acknowledges a short-side bias, criticized the $725 million merger deal, highlighting USBTC’s alleged history of “legal trouble” and the significant ownership of merged Bitcoin miner shares by an “undisclosed related party.”
Among the allegations made in the report, JCapital Research claimed that USBTC had defaulted on a loan and had paid government fines for securities violations. The report also pointed out that USBTC’s CEO, Michael Ho, who is now Hut 8’s Chief Strategy Officer, had concealed his relationship with stock promoters from the Honig Group. The Honig Group had previously faced accusations by the U.S. Securities and Exchange Commission (SEC) in 2019, related to “pump and dump” and “fraudulent schemes.” Honig settled the charges and agreed to a ban from trading penny stocks.
The release of the report led to uncertainty in the market, with some investors selling in response to the allegations. One crypto community member noted the challenge of verifying the short report and the possibility of panic-driven selling. The report raised questions about the future prospects of Hut 8 and its merger with USBTC.
Despite market challenges faced by other crypto miners, Hut 8 has continued to increase its self-mined Bitcoin holdings. In December 2023, the company reported mining 453 Bitcoin, bringing its total reserves to 9,195 BTC, valued at $377 million at current prices.
In conclusion, Hut 8 faces a share price decline and allegations from JCapital Research, highlighting the volatile nature of the cryptocurrency market and the scrutiny faced by companies in the industry.
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