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May 27, 2023

Equity.Guru

Investment information for the new generation

BTCS (BTCS.Q) to give out dividend in Bitcoin. No, really. Why are you walking away?

BTCS (BTCS.Q) will begin paying out its first-ever dividend in two weeks, in Bitcoin.

Yeah. Don’t get excited. It’s $0.05 a share and it’s the functional equivalent of 0.000018 BTC right now. You can of course opt out and get your nickels the old fashioned way. They’re calling it a Bividend, because of course they are. It’s intended as an incentive to on-board new shareholders.

“We want to remind our shareholders that the Bividend record date of March 17, 2022 is approaching in two weeks. Since 2014, BTCS has been dedicated to building out blockchain infrastructure as a means of promoting financial freedom. The Bividend is further proof of our commitment to this emerging industry, and another first-mover innovation for us in what has been a long history of firsts,” said Charles Allen, CEO of BTCS.

If you’re new to investor lingo you may not know what a dividend is so let’s clear that up. If you’re not new then feel free to skip the next section.

A dividend is the distribution of some of a company’s earnings back to some of its shareholders. These are determined by the board of directors. The reason why this is a promo and not an actual dividend is because this company doesn’t have enough earnings to justify giving out a dividend. If you’re looking for a company with long-term investment potential, dividends are one of the things you should be looking for along with a handful of other fundamental line items.

Here’s why this doesn’t make sense as anything other than a gag or a promo.

These are a bit old but here’s their Q3 stats at a glance, which are more or less what you can expect going forward:

  • Expanding blockchain infrastructure operations drove Q3 revenue to $0.3 million, and $0.8 million for the three and nine months ended September 30, 2021, respectively
  • 81% gross margin for the nine months ended September 30, 2021
  • GAAP Net loss was $3.8 million and $15.5 million for the three and nine months ended September 30, 2021, respectively, triggered by non-cash charges
  • $1.9 million in Adjusted EBITDA, a non-GAAP financial measure, for the nine months ended September 30, 2021 (please refer to the reconciliation toward the end of this press release)
  • Stockholders’ equity was $8.48 million at September 30, 2021, up $7.4 million from December 31, 2020
  • The fair market value of earned digital assets rewards for operating validator nodes for the three and nine months ended September 30, 2021 was $0.34 million and $0.91 million, respectively
  • Repaid $1.0 million in convertible debt, eliminating potential equity dilution.

Dividend paying stocks are profitable or why the hell would they give dividends? This isn’t a company in a position to hand out dividends. Odds are good they probably never will be. Don’t expect this promo to last long.

Giving them the benefit of the doubt here, but the idea originally came about when they bought the Bividend.com domain name, but it wasn’t until this year that the company was trading at a discount to its cash and market value of its crypto holdings that it seemed like an adequate option.

Honestly, I’d disagree with them about their crypto holdings if I was a shareholder.

“The Company’s total digital asset position, which includes its staked digital assets, had a FMV of $30.2 million as of September 30, 2021, up 1,708% over September 30, 2020. As of November 4, 2021, the FMV of BTCS’ digital asset position increased to $45.7 million for a +51% increase in 4Q 2021 to date.”

That’s not enough especially given the volatility of their assets (Bitcoin and Ethereum, mostly).

It just seems like a bad idea even if it’s somehow not just a temporary promo wrapped up in fancy stock terms to draw in the rubes.

—Joseph Morton

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