Have you ever heard of MARA? If you don't have a particular affinity for crypto, the answer to this question is probably "no". However, in times when Bitcoin is conjuring up new highs almost daily, it is time for the traditional stock market community to take a closer look at this NASDAQ stock. The company, which was founded in 2010, is no less than the largest listed miner in the USA. MARA also holds its own Bitcoins. A glance at the chart reveals that the share is not for the faint-hearted. However, the high volatility can be cleverly used for structured products in order to chase lucrative returns with partial protection.
The crypto sector is currently receiving a particular boost from the upcoming change of government in the US. Two weeks after the election of Donald Trump as the next US president, the cabinet is already taking shape with new ministers and the 78-year-old is also revealing more and more details of his future policies. Fans of crypto assets among others, are pricking up their ears. The self-proclaimed "crypto president" recently discussed his plans at a Bitcoin conference, which envisage friendlier regulation and are intended to turn the USA into the crypto capital and Bitcoin superpower. A circumstance that could play into MARA's hands as a major Bitcoin miner and owner.
The joy of a more crypto-friendly environment is reflected in higher prices. In the past four weeks alone, the oldest and largest cyber currency has risen by a third. This is also urgently needed with regard to miners, as the halving in April of this year has halved the remuneration for mining. This is now being offset by the rising prices, which are making the bitcoins in their own holdings increasingly valuable. MARA currently holds just under 27,000 BTC, which are worth USD 2.4 billion and therefore account for 35% of the company's market capitalization. And the company is not only constantly producing Bitcoin itself, it is also buying it. To be able to afford this, MARA regularly taps into the capital market. Just earlier this week, the company announced that it would issue new bonds maturing in 2030, firstly to buy back an existing convertible bond and secondly to use the remaining net proceeds to purchase additional Bitcoins and make strategic acquisitions.
The fresh money will also be used to expand the data centers. Over the course of the year, MARA has already secured almost 1 gigawatt (GW) of capacity through acquisitions and site developments, bringing its total capacity to around 1.5 GW. The company is currently using this to diversify its business somewhat, particularly in the direction of artificial intelligence (AI). The technology consumes a lot of energy, which poses a major problem for many AI companies. Miners, on the other hand, have long-term contracts and therefore have access to cheaper electricity. This allows them to offer their capacities to other companies. A business that generally generates high margins. MARA is also benefiting from the fresh wind from the White House. Donald Trump is aiming to increase energy and electricity production across all forms of generation and promises the "lowest electricity and energy prices in the world".
With its diversification strategy, MARA could succeed in reviving its recently weakening profits. In the third quarter, the group reported a bottom-line loss of just under USD 125 million, missing analysts' expectations for the second time in a row. The loss also meant that net income after nine months fell from USD 109 million in the previous year to just USD 12.7 million. Even if analysts assume that MARA will be in the black for the second year in a row in 2024, losses are to be feared again for the next two years (see chart). This also explains the cautious analyst assessment. The average consensus recommendation for the share is "hold" with an average 12-month price target of USD 21.50.
The fluctuations in earnings also cause huge fluctuations in the share price. The four-week volatility alone is around 120%. The volatility can in turn be used to structure attractive barrier reverse convertibles. Leonteq has seized the opportunity and formed two new soft-callable BRCs with exceptionally attractive conditions. The CHF-denominated variant has a coupon of 14.20% p.a., while the USD-denominated instrument even offers a whopping 20.00% p.a. In addition, both products have a solid risk buffer of 51%, which protects the nominal value during the maximum one-year term. A particularly positive aspect is that it is a European barrier. This is only active at the final fixing and thus gives the underlying unlimited scope for movement during the term.
In order to receive the high coupons pro rata, the MARA share must trade above the coupon trigger level of 50% of the initial level on the quarterly observation dates. If the coupon payment is not made on a key date, it is not lost at the same time. Due to the memory mechanism, the payment can be made up for if MARA is quoted above the coupon trigger level again on one of the following observation dates. The term may be shortened due to the built-in soft callable function. After half a year, the issuer has the right to early redemption at 100% every three months for both BRCs.
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