Future FinTech Group Inc (NASDAQ: FTFT) is making a run for the top in the market this morning after announcing that it has entered into a framework agreement surrounding the acquisition of a Bitcoin mining operation. Here’s what’s happening:
Future Fintech Announces Acquisition Plans
In the press release, Future Fintech said that it has entered into an acquisition framework agreement surrounding the acquisition of Nanjing Ribensi. At the moment, Nanjing Ribensi operates a bitcoin mining farm with the ability to operate 30,000 mining machines.
For those of you who haven’t been following Bitcoin, the digital currency has grown to be worth massive amounts of money, and mining operations are being viewed as more and more valuable.
In the release, Future Fintech said that the agreement is a non-binding one, but if all goes well, will lead to the acquisition of the mining operation. As part of the agreement, FTFT will pay about $9.1 million in the acquisition of the company.
Importantly, the sellers of the mining operation guarantee that net profits from the operation will be at least $2.3 million in 20201, $3 million in 2022, and $3.8 million in 2023. This guarantee means that if operations don’t lead to these levels of net profits, the sellers of the operation will make the company whole by paying the difference.
The sellers of the operation have also guaranteed that the mining farm will maintain normal operation for a minimum of six to eight years, during which time, the current operation team of the company will be responsible for the operation of the mining farm, which includes maintenance, management and updating mining equipment.
In a statement, Mr. Shanchung Huang, CEO at Future FinTech, had the following to offer:
We have formed an internal Company committee, the FT Bitcoin Mining Hash Rate Committee, to oversee and manage the potential acquisition, maintenance and operation of all of our bitcoin mining related development. The bitcoin mining farm that we have targeted for potential acquisition not only enables us to deploy advanced bitcoin mining machines, but to potentially generate profits due to the expected low energy cost of the target mining farm since it uses local low cost of hydroelectricity to run the mining machines.
A Short Squeeze In The Making
Not only is the news that was released by Future FinTech exciting in terms of long-term potential, the short term here could be exciting as well as the news has the potential to trigger a short squeeze.
Keep in mind, Future FinTech trades with a short interest of about 16%. That’s pretty high and as the price continues to tick up, shorts will lose their shirts. As a result, this uptick may lead shorts to race to cover their position by buying shares, leading to tremendous increases in volume and price appreciation.
Moreover, the public float on the stock is only about 33 million shares. Sure, that may sound like quite a bit, but the reality is that this is a very small float. As a result, if demand for shares continues to tick up, supplies might not be able to keep up, leading to an exacerbation of the gains.
The Bottom Line
All told, the news released by Future FinTech this morning is exciting. It points to the fact that the company is continuing to expand its efforts with regard to cryptocurrency mining and sets the stage for a short squeeze that could lead to tremendous short run gains. All in all, FTFT stock is one to watch closely.