Preferreds are (generally) a ball-ache - BitMine Immersion Technologies

AlexM · 2026-06-04T01:43:11.892Z

For anyone not familiar with preferred shares, they're not usually a positive for us retail investors. 3,000,000 shares is pretty substantial - I had a quick look at the filing, and while it's only a preliminary prospectus (the final prospectus once released may list a different PO price), they mention $100 being the stated amount per share and the liquidation preference per share, so the company would receive $300 mil, the preferred shareholders would receive $28.5 mil per year, and we retail receive... essentially nothing 😅 (upfront anyway). That's said a little tongue in cheek, as in theory, we'd benefit from the difference between whatever BMNR WOULD have returned us in share price appreciation if they HADN'T issued these shares, and whatever we WILL receive from share price appreciation assuming the cash raised benefits the business as management hope. Why am I not a fan of preferred shares? Because they're marketed as an alternative to straight up dilution, when effectively the end result on retail will be similar - Dilution occurs > net income attributable to common stockholders is spread across a higher share count > diluted EPS comes in lower > deserved valuation is lowered in tandem. Preferreds occur > net income attributable to common stockholders takes a hit from the dividend payments > the resulting lower net income ATCS is spread across the lower share count > deserved valuation is lowered in tandem, same as with standard dilution. In both cases, you're betting the proceeds (in this case $300 mil) will be used to improve the company to enough of a degree to offset the negative impacts of the dilution or the divi payments, in each example (funding growth, purchasing ETH to stake etc). These preferreds are also perpetual, meaning the divi payments continue indefinitely unless repurchased, so I'd expect them to be repurchased within a decade, else the cost in divi payments would exceed the cash generated and in that case dilution may have been the better option. Just to be clear, we don't receive ANY of the stated dividends - they're JUST for the preferred shareholders, unless we're lucky enough to be named in the filing 😅 (one can dream!) One final reason I'm not a big fan of preferreds is that if one of the holders is Tom Lee, or FundStrat, there's likely to be an uproar whenever they eventually get repurchased - during SOFI's dark days, they repurchased their preferreds, and one of the beneficiaries was their CEO Anthony Noto. All perfectly above board, and actually a GOOD THING as it meant he received a one-time payout of like $600k rather than an annual divi payment PLUS $600k later down the line whenever the company eventually repurchased the preferreds... but sentiment bottomed, bears twisted the narrative as the CEO making a judgement call that benefitted him, so he "obviously didn't care about the shareholders" etc etc. You could imagine similar narrative risk with these BMNR preferreds if Tom Lee was a holder. Not the end of the world, but not fun. I'm still holding a small position, and I'm down about 40% on it. I bought it as a proxy for ETH, as ETH has an ABUNDANCE of long term potential as one of the few Cryptocurrencies with real world, applicable use cases, and if ETH eventually moves, BMNR should too. This price action isn't fun for investors, sure, and frankly I probably had enough indirect Crypto exposure through some of my other FinTech holdings that this wasn't a necessary purchase, but hindsight is always 20/20 lol. To be clear, I'm not anti-preferreds and pro-dilution, or vice versa. I'm simply pro-growth lol. If all their dilution and the cash raised from these preferreds etc lead to a larger increase in shareholder value, I'm all for it. But time will tell! NFA, GL 🍻

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