Jefferies Downgrades Marathon Digital Rating Amid Construction Delays

• Jefferies Group downgraded its rating for Bitcoin miner Marathon Digital Holdings from „buy“ to „hold“ due to construction delays and worsened mining economics.
• Marathon Digital shares surged by more than 3% at $4.23 in pre-market trading in line with the broader market trends in the global crypto market.
• Marathon fell short of its 9 EH/s hashrate target for the end of 2022 because 2.1 EH/s of computers are awaiting energization at Applied Digital’s Texas hosting site.

Investment bank Jefferies Group recently downgraded its rating for Bitcoin miner Marathon Digital Holdings (MARA) from „buy“ to „hold“ due to construction delays and worsened mining economics, as well as a lack of transparency around the execution risks for MARA’s hosting partners. This news came as a shock to many investors, as Marathon Digital shares had surged by more than 3% in pre-market trading in line with the broader market trends in the global crypto market.

Jefferies Group noted that Marathon had projected a mid-year deadline for all of its ordered machines, totalling 23 EH/s of computing power, to be operational. However, due to significant construction delays, the investment will not generate revenue for some time. Furthermore, power outages at the King Mountain site in Texas adversely affected the operations at Marathon facilities and caused the firm to reduce its year-end hashrate target from 11.5 EH/s to 9 EH/s.

The bank also mentioned that 2.1 EH/s of computers were awaiting energization at Applied Digital’s Texas hosting site, which was awaiting regulatory approval to turn on the machines. This further reduced Marathon’s chances of reaching its year-end hashrate target.

In addition, Jefferies Group noted that Marathon employs an asset-light model wherein it owns only the mining machines and relies on counterparties to host them in purpose-built infrastructure. This lack of control over the infrastructure further limited Marathon’s ability to meet the projected hashrate targets.

Overall, this news has led to a drop in Marathon Digital’s stock price, with investors now being more cautious about investing in the company. With the construction delays, worsened mining economics, and lack of transparency around the execution risks for MARA’s hosting partners, it will be difficult for Marathon to recover from this setback and reach its original hashrate targets.