The Curious Case of Bitcoin Mining Giant, HUT8’s Stock Buy-Ins Fiach_Dubh Follow Feb 7 · 5 min read

Some interesting HUT8 stock stuff happened recently and it’s coinciding with the announcement that HUT8’s co-founding CEO, Andrew Kiguel, is stepping down soon once the board finds a new CEO.

The following is some commentary from an outsider’s perspective. Full disclosure, I am a stockholder of this company, but I have no internal knowledge of what’s happening behind the scenes… But I do pay attention to the details of this company and read their filings and news releases closely.

In addition to this news of the CEO “stepping down”, the Board is also choosing to end their exclusivity deal with Bitfury in North America. This will apparently save them 2 million a year, which they could be saving anyways by getting a new CEO (Andrew was making close to 3 million per year in compensation, a ridiculous sum for such a small and new company).

Conspiracy theory; this may just be a creative way for the Bitfury dominated HUT8 Board to get rid of their last obstacle to ending the exclusivity deal. By hiring a new CEO for only 1 million in compensation, and then passing the savings off as savings from ending the Bitfury exclusivity deal they may be able to sell this to public shareholders. Clever.

But really, I think we’re seeing a full Bitfury soft coup of HUT8 at this point. HUT8’s board is already mostly Bitfury members or associates, and Bitfury owns a huge chunk of HUT8 common stock (47%).

Short term this is causing a lot of uncertainty for the stock, long term though, it could be beneficial to finally have Bitfury stepping up to take the reigns of what was always their baby.

So, in terms of getting a new CEO, I’m all for it if we can reduce the ridiculous executive compensation and get a better communicator.

Moving onto the stock price and movements. On the same day this was announced, the HUT.TO stock price went down a small amount. But what’s more interesting is when you look at the trades for January 28th and 29th.

Someone traded 20000 shares for 1.75 on January 28th, and another 68000 shares were traded on January 29th for 1.76. Both orders were one bulk order. However, the market price was significantly below 1.76 at the time of the trade, hovering around the 1.59 mark. So, what was going on with these two bulk trades significantly above the spot trading price?

When you look at the details for these two trades you find that they were both a special kind of stock purchase called a Buy-in.

Buy-ins are basically the result of a dealer failing to deliver on the stock he claimed to have purchased for a client.

Thus, this client can go to the Toronto stock exchange in protest, and be like, hey this dealer reneged on my purchase of $### HUT.TO stock after the fact, can you go find the $### of HUT.TO stock for me.

And the TSX is like, sure! We’ll even charge the guy who reneged on the deal any difference in the price to acquire those shares, so no cost to you! Great!

So, the TSX places a special kind of bulk order bid to the general market. They publish this bulk order list every day in a special excel sheet for these weird cases. (ftp://ftp.cdnx.com/TSXBuyInReports)

And in Hut8’s case, there were 75000 shares being asked for a Buy-In on Tuesday, January 28th. But only 20000 of these shares were filled (sold), apparently by Haywood Securities Inc at a price of 1.75

The next day the same thing happened, only this time 105000 shares were asked for as a Buy-In order, and a whopping 68000 of these shares were filled at a price of 1.76 by Haywood Securities Inc.

Keep in mind the stock was trading at a price of 1.60 and 1.58 on those two days.

Haywood Securities made off with an easy profit and a liquidation of over 88000 shares within 2 days. Not bad.

But it also means they’ve concluded it’s worthwhile to let go of a good chunk of their undisclosed holdings of HUT8 at this time. And considering the CEO exit situation, that may not be a positive sign.

In any case, when we combine both these two days of Buy-In demand, we get 180000 shares. Only 88000 of these have been filled, so there is still potentially 92000 worth of shares in demand for future Buy-Ins?

However, since then there have been no new Buy-in orders for HUT8 stock.

Buy-Ins also have some interesting rules around them. After three days, Buy-In clients who have not had their order filled have the option to command the TSX to go onto the open market and start purchasing shares to fulfill the order from the common order-book.

If the person behind these share Buy-Ins decided to exercise this option, you would see the HUT.TO price skyrocket as the TSX tries to purchase shares from the common order book to fulfill an order for 92000 shares, on an order book that on average only has 50000 shares available for purchase.

However, it does not appear that this will occur since there was no third day of Buy-ins being demanded HUT8 stock. In fact, the mirror opposite could have occurred, where the person behind the Buy-in order of 88000 shares potentially dumped these shares on the open market.

This may explain the recent significant decline in the stock price down to 1.04. It has since rebounded back to 1.43. This is mostly just speculation on my part, after all the recent price decline may just be an overreaction by market participants to the recent CEO news.

But my instincts tell me otherwise. There’s something fishy going on with all of this, so I don’t believe that this has been an entirely clean break from the CEO. My gut tells me that there was some disagreement over the exclusivity agreement that caused the Board to use their voting and share the power to oust the CEO. And this Buy-in business smells like an insider taking possession of and selling their stake in the company.

For better or worse, hopefully, these guys find a better and CHEAPER CEO who can communicate better with the Bitcoin community at large.

Keep on Hashing HUT8.