Bitdeer: The Elephant In The Room

Summary During the quarter ended March, Bitdeer reported $70.1 million in top line revenue a year over year decline of 41.3%. For the first time, the company reported SEALMINER sales as an individual revenue segment. Those sales made up 5.8% of top line revenue and have the company’s best gross margins. Based on current market conditions Bitdeer’s SEALMINER A2s appear to be highly cost effective machines relative to competing offerings from Bitmain. The company raised over $300 million in a senior convertible note offering. Simultaneous to that raise, Bitdeer spend $130 million on call options that look dubious so far. Back in late-February, I covered Bitdeer ( BTDR ) for Seeking Alpha and spent time dissecting what I felt were the weak points of the company’s business. After what I viewed to be a pretty awful year for the company in 2024, my closing takeaway was pretty simple: I see a company that is growing increasingly reliant on a segment that produced the worst gross margins of its four business lines during 2024. But the lone comment to that article pointed out something rather important, Bitdeer is adapting its business and aims to become a major player in the ASIC space. The ‘elephant in the room’ that I neglected to mention in February was the company’s SEALMINER ambitions. After a Q1-25 report with SEALMINER sales broken out, we can assess how that business compares with Bitdeer’s existing segments. We’ll also look at the recent convertible note offering from the company. SEALMINER Sales & Q1-25 Revenue During the quarter ended March, Bitdeer reported $70.1 million in top line revenue. This was a decline of 41.3% year over year but a slight sequential bump from the $69 million reported at the end of December. More importantly, Bitdeer reported its first quarter of negative gross profit at -$3.2 million: Data by YCharts Adjusted EBITDA was negative by over $56 million and the company drew down its cash position by roughly 55% from $476 million at the end of December to $216 million at the end of March. It wasn’t all bad in Q1 though. For the first time, Bitdeer’s Q1-25 report gives investors insight into the profitability of the company’s mining rig manufacturing segment. And the early indications from that line are good: $ in Millions Revenue Gross Profit Gross Margin Self-Mining $37.2 -$3.8 -10.2% Cloud Hash $0.1 $0.0 0.0% General Hosting $9.6 $0.5 5.2% Membership $16.3 $0.9 5.5% SEALMINERs $4.1 $0.8 19.5% Source: Bitdeer At 19.5% in the first quarter, SEALMINER sales were Bitdeer’s most profitable business segment by far. Self-mining actually came in negative after $41 million in COGS to generate $37.2 million in self-mining revenue. Cloud Hash is all but a memory with just $0.1 million in revenue in Q1 while Membership and General Hosting have seen considerable compression in gross margins compared 16% and 23% respectively during 2024. I’ll admit, the margin from early SEALMINER sales are encouraging, especially compared to how the rest of Bitdeer’s business is performing. But the company has a long way to go before SEALMINERs can make for some of the issues elsewhere. Bitdeer Revenue By Segment (Bitdeer/Author’s Chart) SEALMINER sales were a very small portion of the company’s top line revenue at just 5.8%. Given the degree to which Bitdeer is scaling self-mining exahash, I would expect self-mining to continue to generate the lion’s share of Bitdeer’s business for the remainder of this year: Bitdeer Production (Bitdeer/Author’s Chart) As of end of May, Bitdeer’s self-mining footprint reached 13.6 EH/s. This was largely attributed to the company energizing its SEALMINER rigs for self-mining in addition to selling them to the public. SEALMINER Profitability and Sales Projections When comparing mining rigs, hashrate and joule/TH metrics are often focal points in the market. Yet, powering the most efficient rig by J/TH might not be smart if the purchaser overpays for the machine. Thus, cost per TH is perhaps the more important metric, in my view. The screen shot below shows the top ten Bitcoin mining rigs organized by hashrate. Two of Bitdeer’s A2 models crack the top ten but the bigger takeaway is how cost effective these machines are compared to Bitmain machines: Bitcoin Mining Rig Comparison (MiningNow) Keep in mind, this data is changing constantly. But at present time, Bitdeer’s A2 rigs can be purchased for less than $10/TH while Bitmain’s Antminers are often at least double the price per TH. This is important because it means the payback period on purchasing these machines is effectively half the time for the SEALMINER A2s: A2 Pro Hyd Pricing (MiningNow) The screen shot above shows the payback period on the A2 Pro Hyd is just 262 days given current market conditions. Antiminer S23 Hyd 3U has a payback period closer to 540 days. To me, the real question for Bitdeer investors going forward is can the company scale SEALMINER sales? ASIC Market TAM (Bitdeer) The company certainly believes this to be the case and projects $6.4 billion in revenue between 2025 and 2027 if it can achieve 30% share of the market. Bitdeer spent $59 million on R&D in the quarter – this spend was tied to development of the SEALMINER A3 and A4 units that are expected later this year. Bitdeer is guiding for 5.5-6 joules per TH on the A4s. Which, if achieved, would be a groundbreaking efficiency in the ASIC industry. $330 Million Convertible Note Offering Bitdeer announced a $300 million senior convertible note offering in mid-June. That offering was subsequently up-sized to $330 million and the notes pay 4.875% through July 1st, 2031. Each $1,000 in capital raised has a common stock conversion rate of 62.9921 Class A ordinary shares or $15.88 per share. Possible dilution from the converts – assuming it makes financial sense for the note holders to take BTDR shares – would be 20.8 million shares. Of the roughly $320 million in proceeds from the offering, Bitdeer will spend just under $130 million to pay for a zero-strike call transaction that would limit dilution risk to shareholders. Most of the remaining capital is earmarked for data center growth, ASIC development, working capital, and general corporate purposes. The call transaction is interesting to me. The calls are designed for conversion hedging and flexibility. At 10.2 million shares and a premium of $129.6 million, the price of BTDR stock has to exceed $12.70 per share to justify the wager. At current BTDR prices – $10.98 on June 24th close – you could argue the premium paid for that call transaction could have been better served as a simple repurchase plan rather than as an options play. For instance, at $11 per share, open market repurchases with $129.6 million buy 11.9 million BTDR shares rather than the 10.2 million from the call strategy. It’s still very early, but with the benefit of hindsight, the short-term impact of the call strategy appears negative, from where I sit. The company is betting capital based on the assumption that its share price will increase. Which is a positive sign if you’re a believer in Bitdeer’s growth prospects. I’m much less convinced that Bitdeer can scale self-mining EH/s to 40 by Q4 this year based on where it was at the end of May. But I’ve been wrong about this company in the past and that could certainly happen again. Valuation Relative to Peers In the past, one of my biggest concerns about Bitdeer stock was its valuation relative to peers. I’ve typically looked at those valuations through price to book and price to sales multiples. The price to book story looks much better than it has in the past: Data by YCharts At just 2.7x book, BTDR is far less expensive than it was at the beginning of 2025 and is now a bit more in line with peers. The same is true for the forward sales multiple: Data by YCharts Here, we actually see BTDR is on the cheap side at just 2.7x forward sales. This puts the company below the info tech sector median of 2.8x forward sales and well below what we’re seeing from the rest of the top miners in the industry. Closing Summary Now that we have a quarter of SEALMINER sales to assess, I’m coming around on Bitdeer. Not only were the mining machine sales the most profitable business for Bitdeer on a gross margin basis, but the cost per TH numbers from the A2 rigs are actually very good. Remember, my original bearishness BTDR has been due to Cloud Hash – this was a business that was unsustainable because it was a poor product for the plan purchasers. I’d argue the opposite is true for Bitdeer’s mining machines. Those look cost effective and efficient given current market conditions. The question is whether or not Bitdeer can scale those sales. Based on the use of proceeds from the recent convertible note offering, I’d argue the company is betting on itself to achieve some of the numbers laid out in its TAM projections for ASIC growth. At $11 per share, the stock isn’t nearly as overvalued as it was at the end of 2024 and it could be argued BTDR is actually cheap compared to mining stock peers. I’m upgrading BTDR from ‘sell’ to ‘hold.’

Source: Seeking Alpha