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8/30/18

HIVE Blockchain Technologies (HIVE.v) financials

HIVE Blockchain Technologies (HIVE.v) posted its 1q19 financials last night and the stock is down this morning. One of the reasons may be that its CEO Harry Pokrandt is retiring (and can therefore sell his large slug of shares without anybody noticing), but that's probably not the real reason for weakness today. That'd be the state of the financials and what lies ahead for HIVE. Charts please!

This shows the full extent of how much it costs to run HIVE...


...and you need to understand what's going on in this chart. First up, the main red block is what HIVE would like you to believe as their only cost of doing business, the "operating and maintenance costs". Yes it's one of the two biggies, but it's hardly the whole banana. Importantly, the calc includes the depreciation of its computing equipment that was substantially greater this quarter, but is still woefully underestimating the true DDA involved with these machines that go out of hashing fashion very quickly. There's a long-winded way of explaining why depreciation (a balance sheet item) needs to be included in any true calculation of the true cost (a P+L matter) of running this company, but the essence is simple; Anyone ignoring the replacement price of the HIVE equipment when making their case for (or against) the company doesn't have a freakin' clue. Period.

There are other minor costs too, including a charge of $255,000 for travel expenses, another crazy amount for a company this size (Frank Giustra hiring out his private jet?) and means that in just nine months, these guys have spent $872,000 on travel (over $3,200 a day). This line item needs poitning out, it gives you a window on the corporate attitude.

So, add 'em up and then stick the costs next to the total income at HIVE. That's made up of two things, the revenue in the quarter plus the "coin revaluation". That one will be important in the quarters to come as well, it's the way to keep a handle on the true state of liquidity if they have indeed decided to sell all inventory.


Ladies and gentlemen, HIVE costs more to run than the revenue it generates. Sounds sustainable, yeah? And indeed, HIVE reported a net loss of $2.7m on the quarter but for me, the more important measure of liquidity, working capital, and its $7.5m drop to $30.1m is more indicative of the situation.

And finally, if you do a bit of math on the number of ETH coins sold during the quarter (17,555), take away a small amount for the minor Ethereum Classic sales and then run that through the revenues number, you work out that HIVE.v sold its ETH at an average of U$570 during the quarter. Which compares to these numbers:
  • Average price of ETH in current quarter (July 1 to Sep 30) to date: U$380
  • Current price for ETH: U$284
Which does not make for good optics in the current quarter in progress. When HIVE reports its Q2, unless ETH rallies hard and/or it sells all its ETH inventory they're not going to pull in more than $6.5m and that won't even cover the true depreciation of this shell game company.