So far crypto mining company SOS Limited (NYSE:SOS) has not released either its Q1 or Q2 earnings (in this case losses) or its balance sheet. That makes SOS stock nothing more than a gamble right now.
As I wrote in my last article on SOS stock, I expect that it will continue to drop. In this situation, the best thing to do is wait until the stock falls to its cash per share. Here is my calculation of what that level is.
My best guess is that SOS Limited, a Chinese crypto miner, has about $125 million in cash on its balance sheet. On April 4 the company’s latest prospectus filing indicates on page S-8 that SOS has 179.507 million ADS (American Depository Shares) outstanding. Therefore the cash per share is about 70 cents (i.e., $125 m/179.507m = $0.68635 per sh.).
Given that the Chinese government has been cracking down on Chinese crypto miners, and given its lack of disclosure, it seems best to wait for this drop. Since SOS stock is at $2.56 as of Aug. 3, it has a lot further to go. This means it could fall another $1.86, or 73% from its present level to 70 cents. It also means that the market value will fall to $125 million from its level today of $479 million.
In fact, if the company has ceased its mining operations, as I suspect it has, and if losses are deepening, then the company’s cash may have dropped to $110 million or $100 million. That would lower its value to between 56 cents to 61 cents per share.
I was going to write about the company’s losses going forward and what that might imply about the stock. But the problem is there are no financials to work with for this year. Moreover, no analysts cover the stock as well.
On page S-4 of its latest prospectus, SOS discusses its prospective crypto mining operations in the Republic of China. However, since then the Chinese government has begun shutting down crypto mining operations all throughout China.
In fact, Bloomberg reports that Bobby Lee, one of China’s first Bitcoin moguls, fears this could lead to an outright ban on cryptocurrencies in China. He knows what he is talking about. He sold the country’s first Bitcoin (CCC:BTC-USD) exchange back in 2017 during a previous Chinese crackdown. In the Bloomberg interview, he put the odds that the government bans all cryptos, which he calls “the final straw,” at 50-50.
That would have a dire effect on SOS stock. But, unfortunately, there has been no word from SOS Limited about their operations. This seems reckless, especially since they just raised $125 million from investors partly to fund these crypto operations.
What To Do With SOS Stock
Therefore, to say that SOS stock is highly speculative, is, to put it mildly, an understatement. That is the main reason why I believe it is likely to fall to or even below the cash per share level.
So the best thing most investors can do in this situation is to wait and see what the company says about its future. Also, it is important, given the huge implications of the Chinese crackdown and the deleterious effect it will have on the company’s plans and financials.
Unless you have some reason to believe that SOS stock will rise from today’s price level, it might be better to wait until it falls to between 56 cents to 70 cents per share. That means wait until it drops 73% to 78% from today’s level before making any decision to buy the stock.
On the date of publication, Mark R. Hake held a long position in Bitcoin but not in any other security mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.