Marathon Digital stock drops 8% after $138 Million penalty
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Marathon Digital Holdings (MARA) saw its stock value decrease by up to 8% in after-hours trading on August 1, 2024. This reduction came after the company disclosed that its income for the second quarter did not meet the expectations set by Wall Street analysts.
The company said it made $145.1 million, which was less than the $157.9 million that FactSet predicted. Marathon said the lower earnings were because of problems that hurt its ability to mine bitcoins and the effects of recent halving events in the mining industry. These issues caused the company to earn less money than expected.
Marathon Digital Is Currently Facing A $138 Million Penalty
The Chief Executive Officer of Marathon Digital Holdings, Fred Thiel, explained that in the second quarter of 2024, their bitcoin production was hurt by unexpected equipment problems and fixing power lines at the Ellendale site run by Applied Digital. He noted that the rise in the global hash rate and the halving event in April made things worse.
Marathon Digital is presently facing a fine of $138 million for a breach of contract with Micheal Ho. Michael happens to be the Chief Strategy Officer of Hut 8 and the developer of Marathon’s Bitcoin mining expansion and its strategies.
Marathon had sought the technical know-how of Ho to increase the efficiency and effectiveness of its operations. This aim was to match up and handle the demands that come along with growth, but it all ended in a serious legal involvement.
Marathon Digital Adjusted EBITDA Result Showed A Loss Of $85.1 million
Despite these problems, Marathon Digital achieved a record mining power of 31.5 exahash per second (EH/s) in the second quarter. On the other hand, the company’s adjusted EBITDA went negative, recording a loss of $85.1 million, whereas it had a gain of $35.8 million in the same quarter last year. The loss was largely because of unfavorable changes in the value of its digital assets and a reduction in the number of bitcoins mined.
During the second quarter, Marathon sold 51% of the bitcoin it mined to cover its running costs. The company recently announced a major purchase of $100 million worth of Bitcoin from the open market.
They have also revised their strategy to retain all their bitcoin on their balance sheet. Now, Marathon holds more than 20,000 BTC.
According to Thiel, during the quarter, the company adjusted the internal organization of the business to better fit its growth possibilities. This effort was intended to make the company more agile and prepared for new opportunities.
