To investors,

The Wall Street Journal broke the news yesterday that the Trump family was jumping into the bitcoin mining game. Vicky Ge Huang writes:

“The president’s two oldest sons are investing in a bitcoin-mining company, adding to the Trump family’s expanding portfolio of cryptocurrency businesses.

Eric Trump and Donald Trump Jr.’s American Data Centers will merge with and take a 20% stake in American Bitcoin, a mining operation majority-owned by Hut 8, the publicly traded crypto-infrastructure company. Together, they aim to create the world’s largest miner of the digital currency, with designs on building its own “bitcoin reserve.””

Given the President’s fascination with bitcoin and cryptocurrencies, I am surprised it took this long for his family to get involved with the infrastructure side of the industry. There is nothing more American than using energy to produce profits.

It is smart for Eric and Don Jr to partner with an existing bitcoin miner, rather than trying to build a dominant mining company from scratch. These businesses are capital intensive and the boom/bust price cycles make it a very difficult environment to operate in.

Hut 8, a company where I am an advisor and shareholder, has an unique strategy of owning energy infrastructure focused on powering modern energy consumption use cases. The two most popular consumption clients are bitcoin miners and AI data centers right now — you can read my original thesis for the company in my letter from October 30, 2024 titled “My plan to become an energy dealer.“

If things are going well, why would Hut 8 take their bitcoin mining business and spin it out into a majority owned subsidiary? The answer is simple — they want the market to have clarity on their business.

Bitcoin mining businesses usually trade at a 6-7x revenue multiple. Advanced computing companies providing data centers to artificial intelligence use cases trade at 19-22x revenue multiples. If you have a business that does both bitcoin mining and AI data centers, the market doesn’t know how to value you.

So Hut 8 is breaking the businesses out into separate entities. Investors can now allocate capital to a pure play bitcoin miner if that is what they want. Or they can allocate their capital to a pure play AI data center and energy infrastructure provider.

This is an interesting approach because the business world is one big cycle of bundling and unbundling. We saw the bundling of bitcoin mining and AI data centers over the last 5 years. Hut 8 is one of the first companies I am aware of to unbundle the two from each other.

In addition to the unbundling, the legacy Hut 8 business is able to lower their cost of capital as well. The company becomes more financeable having its high volatility, high capex business (bitcoin mining) spun out and thus makes it easier to finance data center development projects down the road.

This all makes sense if you are trying to create shareholder value. Existing Hut 8 shareholders will own 80% of the new American Bitcoin business. Eric Trump will become Chief Strategy Officer and the shareholders of American Data Centers will own the remaining 20% of the business.

So now Hut 8 shareholders have a two way option — they benefit from the bitcoin mining and they benefit from the AI infrastructure. As I wrote in my original letter about Hut 8 last year, “Public market investors usually underestimate the importance of creative dealmaking when evaluating companies because it requires qualitative analysis that doesn’t fit into a spreadsheet.”

This deal to create American Bitcoin is a perfect example of what I was talking about. When you have a dealmaker at the helm of a company, you don’t know when or how they will strike — but it is almost guaranteed they will strike. And that is exactly what Asher Genoot and the Hut 8 team just did.

Dealmakers make deals.

And this deal is probably one of the most interesting ones I have seen in recent months. Keep an eye out on the impact to the stock price of both entities. If there is a positive impact in the coming weeks, I would expect other companies with bitcoin mining and AI data centers bundled to follow in similar footsteps.

Time will tell. Hope you all have a great day. I’ll talk to everyone tomorrow.

– Anthony Pompliano

Founder & CEO, Professional Capital Management

Reposting what I shared yesterday: Speaking of learning, I have been fairly public about my lessons learned during the 2021 bull market and the subsequent 2022 bear market. No one likes to hold assets through a big drawdown, so I am planning to sell many of my liquid investments outside of bitcoin at some point in 2025 (first rule of bitcoin: never sell your bitcoin!). I don’t know when, how, or why at the moment, but I want to give everyone fair warning about my current thought process. I would love to hear from all of you about how you are thinking about the 4-year cycles and holding, selling or buying the dip.

Overview of Bitcoin & AI Data Centers with Hut 8 CEO Asher Genoot

Asher Genoot is the CEO of Hut 8 Corp, one of the leading companies when it comes to bitcoin mining and AI data centers.

In this conversation he breaks down what the business is, why it’s important, how they are thinking about deploying capital, how they are selecting the sites, and the difference between bitcoin mining and data centers.

Enjoy!

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DISCLAIMER: The author of this letter is not a securities dealer or broker, investment adviser or financial adviser, and you should not rely on the information herein as investment advice. The author is a paid advisor to Hut 8. If you are seeking personal investment advice, please contact a qualified and registered broker, investment adviser or financial adviser. You should not make any investment decisions based on this communication. Examples that the author provides of share price increases pertaining to a particular Issuer from one referenced date to another represent an arbitrarily chosen time period and are no indication whatsoever of future stock prices for that Issuer and are of no predictive value. Stock profiles contained herein are intended to highlight certain companies for your further investigation; they are not stock recommendations or constitute an offer or sale of the referenced securities. The securities issued by the companies profiled should be considered high risk; if you do invest despite these warnings, you may lose your entire investment. Please do your own research before investing, including reading the available public filings, press releases, and risk disclosures. It is our policy that information contained in this profile was provided by the company, extracted from regulatory filings, company websites, and other publicly available sources. The author believes the sources and information are accurate and reliable but cannot guarantee it.