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LM Funding America, a Tampa-based bitcoin-mining company, says it offered a 1-for-6 reverse stock split of outstanding common stock, effective at 12:01 a.m. Tuesday.
The firm's common stock, traded on Nasdaq, will then trade on a split-adjusted basis, LM Funding says in a news release.
A reverse stock split consolidates the number of existing shares of stock "into fewer, higher-priced shares," according to Investopedia.
The reverse split is an attempt to stay on Nasdaq, where stocks must trade above $1. On Monday, LM Funding stock (symbol: LMFA) surged by more than 30%, to hit $0.57 cents during intra-day trading.
LM Funding CEO Bruce Rodgers told the Business Observer in January that his firm had been automatically afforded a 180-calendar day grace period, until April 8, to regain compliance with Nasdaq rules on share price.
LM Funding is primarily a bitcoin-mining company with eight employees and 6,000 bitcoin-specific computers placed in Kentucky and Texas. The company held 127 bitcoins at the end of January, when bitcoin was trading for about $42,000 per coin.
The company says it receives about one bitcoin per day via pooled mining operations. Mining means data centers making quintillions of guesses every second to add the next block of data to the bitcoin blockchain. As bitcoin goes up in value, more big players have entered "mining" operations with huge data centers that need power, cooling and human tenders.
One bitcoin reward of 6.25 coins is awarded every 10 minutes to some miner.
LM Funding's computers advertise their computational power as 614 "petahash," or 614 quadrillion guesses a second. That's a lot but LM Funding needs more so it pools its guesses, or "hashes," with other miners, and they split the reward.
On Monday, the trading price for bitcoin surged past $72,000, meaning just the 127 coins LM Funding held in late January appreciated in value by more than $3.8 million. But the stock has had trouble staying above $1 per share, the Nasdaq minimum.
Rodgers says he believes LM Funding's business fundamentals "are currently strong and that we continue to make good progress, as evidenced by our 1700% year-over-year revenue growth in the third quarter of 2023."
Rodgers says LM Funding is undervalued by the market.
"The stockholders' equity of LM Funding was $35.9 million, or $2.45 per share, or $14.70 per share after giving effect to the reverse split announced today, as of September 30, 2023," Rodgers says in the release. "And yet our current share price remains below the Nasdaq minimum bid price requirement of $1."
Rodgers says the share consolidation will not only ensure LM Funding meets the continued listing requirements but also helps "attract a broader universe of investors, including institutional investors and retail brokers." There will be no change to the total number of authorized shares of LM Funding common stock as set forth in the company's certificate of incorporation, the firm says.
LM Funding also has subsidiaries, including its legacy business of specialty finance for homeowners associations that led to LM Funding going public in 2015. LM Funding commenced bitcoin mining operations in September 2022, and soon began reaping millions of dollars in revenue.
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