Summary CleanSpark mined 7,024 BTC in 2024, maintaining a pure play on Bitcoin while competitors diversify into high-performance computing. The company used convertible note proceeds for share repurchases and covered calls, avoiding the trend of buying more Bitcoin with borrowed money. Despite strong sats/share growth, CleanSpark's stock performance lags Bitcoin's price, making it a better trading vehicle than a long-term investment. Back in October, I upgraded shares of CleanSpark ( CLSK ) from 'hold' to 'buy' after taking a more cautious outlook on the stock for most of 2024. CLSK was a high-flyer in 2023 after bottoming out in December 2022 during the depths of 'crypto winter.' Some of my earlier calls on CLSK in the low-single digits performed quite well in the first half of 2023. With nearly 9 months passed since the block reward halving last April and Bitcoin ( BTC-USD ) briefly surpassing the six-figure USD denominated price milestone, CleanSpark is one of the few Bitcoin mining stocks that remains a pure play on BTC. Data by YCharts Most of the other companies in the space have adopted high-performance computing as secondary business segments and the market has generally rewarded those names more in the last year as can be seen through the performances of stocks like Core Scientific ( CORZ ), IREN Ltd ( IREN ), and TeraWulf ( WULF ). Compared to other mining pure plays, CleanSpark has performed well having bested the returns observed in names like Riot Platforms ( RIOT ) and Marathon Holdings ( MARA ) over the last year. December Production During the month of December, CleanSpark mined 668 Bitcoin, second most of all public miners. This final month figure gave the company a total of 7,024 BTC mined during the full year for 2024. In the chart below, we can see that it has taken a constant ramp up exahash per second to generate similar amounts of BTC that were produced this time last year. CleanSpark, Author's Chart This is obviously a result of both the 50% reduction in the block reward subsidy as well as the growth in global hash rate. As mentioned, CleanSpark remains one of the few public mining stocks that is still fully dedicated to Bitcoin. At 18.8 BTC/EHS in December, CleanSpark is generally in-line with most of the public mining companies. The company continues to guide for 50 EH/s in the 2025 fiscal year. Convertible Notes On December 17th , CleanSpark announced the closing of a $650 million convertible note offering. Convertible notes have become quite trendy for Bitcoin-adjacent companies since it has worked so well for MicroStrategy ( MSTR ) over the last several months. The company's convertible notes pay zero percent and are due 2030. CleanSpark As part of the convertible note offering, CleanSpark has also entered into capped call transactions and repurchased 11.76 million shares of common for $145 million. This is a very interesting strategy because it is aimed at limiting the potential dilution of the stock through conversions from the offering. Per the press release: If the Company elects to settle the conversions of principal of the Convertible Notes in cash and to settle the remainder of any conversions in shares, and the conversions do not follow a notice of redemption or certain corporate events, the Company will not have to issue any additional shares (on a net basis, after accounting for the benefits of the capped call and the share repurchase), until the price of its Common Stock exceeds $33.67. Additionally, I find CleanSpark's convertible offering to be interesting because the company is bucking the sector trend and hasn't used the proceeds to simply buy more Bitcoin at the market rate. Rather, the $633.6 million in net proceeds from the offering, $90.4 million has been used to put on the covered calls and $145 million was used to repurchase CLSK shares. CleanSpark has $398.2 million remaining that it says it will use pay down its credit line with Coinbase ( COIN ), for capex, acquisitions, and corporate purposes. I actually like this approach more than just buying BTC with cash. CoinShares Per data compiled by CoinShares, CleanSpark has one of the lowest all-in costs to mine Bitcoin compared with the rest of the public market. In this bullish Bitcoin environment, it's easy to get excited about companies that raise capital through convertibles to buy more Bitcoin. It's it a bit more contrarian to raise capital through convertibles and not buy BTC. If CleanSpark's past corporate treasury management is any indication, the company might be best equipped to go against the grain and grow BTC through mining rather than debt-based purchases. BTC-Backing BTC Holdings (CleanSpark, Author's Chart) CleanSpark has exhibited a strong ability to grow the company's Bitcoin stack from 228 BTC at the end of 2022 to 9,952 BTC at the end of 2024. As I've mentioned about the publicly traded BTC miners multiple times, these companies have generally been able to grow capacity and capital through shareholder dilution. That has not necessarily boded well for shareholders long term but when looking at shares through a metric like sats per share, we can better assess if that dilution has been accretive to the company's BTC holdings: CleanSpark, Seeking Alpha, Author's Calculations CleanSpark has been able to grow sats/share over the last three years and has done so at a market-beating rate compared to the broader public mining stocks. Consider the year over year change in sats per share between CleanSpark and many of the other top miners in the industry: Sats/Share September 2023 September 2024 YoY CleanSpark 1,398 2,971 112.5% Cipher Mining ( CIFR ) 217 435 100.1% MARA Holdings 6,530 8,804 34.8% HIVE Digital ( HIVE ) 2,016 2,194 8.8% Bitfarms ( BITF ) 253 253 0.0% Hut 8 ( HUT ) 10,524 9,739 -7.5% Riot Platforms 3,733 3,215 -13.9% Source: Company Filings, Seeking Alpha, Author's Calculations At 112.5%, CLSK shares have seen the largest growth in 'sat-backing' compared with other stocks. However, it should be noted that these numbers are only reflective of quarter-ended September 2024. We have broadly seen a large move toward convertible note issuance over the last several months from publicly traded Bitcoin-related companies. Also, it's important to point out that even before the rush to issue convertibles, CleanSpark's long term sats/share growth lags the price of BTC: End of Sept BTC Sats/Share BTC Price CLSK Price 2022 594 1,066 $19,425 $3.18 2024 8,049 2,971 $63,338 $9.34 % Change 1,255.1% 178.7% 226.1% 193.7% Source: Company Filings, Seeking Alpha, Author's Calculations In the table above, sats/share shows us that even though CleanSpark's HODL stack has had explosive growth, when adjusted for common shares outstanding the stock's BTC-backing lags the price of BTC - as does the price of the stock. Closing Summary The emergence of generative AI and HPC services as a potential secondary revenue stream has presented a ' fork in the road ' for Bitcoin mining companies; continue down the path of Bitcoin mining or pivot to the far more profitable HPC data center business? Based on the early reporting we're seeing from the companies that are actually generating revenue from HPC, there doesn't seem to be much of a question that HPC has better gross margins than mining today. However, that may not necessarily be the case long term. We've sort of seen this story before. Bitcoin Hashprice, 5yr history (HashRateIndex) Once upon a time, there was a rush to Bitcoin mining because the profit margin was so tremendous. Through HPC data centers, the allure of robust gross margins has led to yet another 'gold rush' though this one is attached to artificial intelligence and electrical infrastructure. Those fat margins could certainly prove to be temporary. In the event of a possible HPC data center bust, the companies that stick with Bitcoin mining could theoretically outperform those that chase HPC services. The ultimate question is does it make sense to buy miners over simply buying Bitcoin directly? History would suggest that even the mining companies that grow sats/share over time lag the price appreciation of BTC. Thus, I'm still of the view that CleanSpark is a terrific vehicle for trading but not necessarily a great a long term investment compared to Bitcoin. That said, I like CLSK more than most public miners fundamentally and have a position in the stock.
