Shares of Marathon Digital Holdings (MARA) plunged 27% on Monday and continued to slide more than 6% in Tuesday's premarket trading.
Three factors contributed to the market's negative turn on MARA: an investigation by the Securities and Exchange Commission (SEC), an offering of $500 million in convertible Senior Notes and a significant pullback in the price of Bitcoin.
On Monday, Marathon announced that the SEC had called in the company's executives are suing over issues related to its data center in Hardin, Montana. To finance construction, Marathon issued 6 million shares of common stock. Regulators suspect the company of violating federal securities laws.
On the same day, MARA officials announced their intention to raise $500 million through an offering of senior convertible notes due at the end of 2026. Marathon management intends to use the proceeds to purchase additional Bitcoin mining equipment and BTC itself.
The bonds have an obvious disadvantage for current equity investors in that they can be converted into new shares, which will dilute current shareholders, which will always be a drag on the share price.
The third setback was the decline in the price of the first cryptocurrency, which initially reached $66,000 on Monday, but then fell. below $60,000.
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