The price of Ziga Innovation (ZIGA) shares has surged by over 100% year-to-date to a new all-time high after the company announced an investment in Bitcoin mining last week.
ZIGA shares rose by 2.70 baht or 29.35% from the previous day to close at 11.90 baht in the morning trading session of the Market Alternative Investment (MAI) yesterday with trading value of 1.85 billion baht.
ZIGA's share price climbed by 4.32 baht or 88.52% to close at 9.20 baht per share between Monday and Friday last week. Its price has risen by 4.90 baht or 113.95% year-to-date.
Wijit Arayapisit, a senior analyst at Maybank Kim Eng Securities, said ZIGA's plan to invest in Bitcoin mining is aggressive compared to its peers as the company last year announced it would increase its mining capacity to 400 units by the first quarter of 2021, aiming to reach 10,000 units in the future with a budget of 5 billion baht.
He said Bitcoin mining is still a relatively new business. There are also limitations in fundamental analysis such as the volatility of Bitcoin price movements and a lack of reliable data regarding accounting records in the event that the company holds coins for further investment or doesn't sell them after mining them.
Mr Wijit said ZIGA's share price will likely continue rising as its P/E ratio is still below 40 times. Its trading volume also started to rise to 4.8 billion baht at the end of last week, suggesting some institutional investors such as private funds may also be participating in trading.
However, ZIGA is not the first stock to rally after announcing an investment in cryptocurrencies.
Shares of Jasmine Technology Solutions (JTS) also saw a surge of over 1,000% in price-to-earnings (P/E) ratio after the company's board of directors approved the purchase of 6,300 Bitcoin mining machines and investment in electrical and other mining-related systems, with a total investment value of 3.3 billion baht on Dec 21, 2021.
JTS was the hottest stock of 2021. Its price soared 6,688% from 1.93 baht at the end of 2020 to close at 131 baht at the end of 2021.
Currently, the P/E ratio of JTS shares stands at approximately 1,150 times.
The Securities and Exchange Commission (SEC) urged JTS's stockholders last week to carefully consider the investment plan and excercise their voting rights at the upcoming extraordinary general meeting of shareholders on Feb 22.
As there are many variables in the Bitcoin mining business that JTS or its subsidiaries cannot control such as the Bitcoin price, this may have an important effect on cash flow. Independent financial advisers warned that the board's additional investment in Bitcoin mining may greatly affect the company's operating results and their returns.
