Original Author: Oluwapelumi Adejumo
Original Compilation: Chopper
BitMine has aggressively built up its Ethereum holdings, aiming to turn them into a stable source of cash flow. In the last quarter, its staking business generated nearly $46 million in revenue.
However, a $92.1 million loss on derivative options completely offset the staking gains. Coupled with persistently rising asset management costs and aggressive share issuances, the profit potential for existing shareholders was significantly compressed.
The Q3 FY2026 financial report, for the period ending May 31, shows company revenue skyrocketed to $46.5 million from $2.1 million in the same period last year. Of this, 98% ($45.7 million) came from staking and node validation services. BitMine is accelerating its shift away from Bitcoin mining operations to fully embrace an Ethereum treasury model.
Behind the substantial revenue growth, the company recorded a net loss of $83.6 million this quarter, a dramatic increase compared to a modest loss of $623,000 in the same quarter last year.
Huge Options Loss Erases All Ethereum Staking Gains
The core factor dragging down this quarter's performance was the company's Ethereum derivatives options trading strategy. BitMine incurred a total loss of $92.1 million on Ethereum-related derivatives this quarter, roughly double the total revenue from its staking business in the same period. Of this, $78.6 million came from net losses on expired option contracts, and $14 million from losses on exercised positions. A mere $534,000 gain from open contracts only slightly offset part of the loss.
The company engaged in no derivative trading during the same period last year, marking a qualitative leap in the risk exposure of its asset management operations. For the first nine months of this fiscal year, cumulative derivative losses reached $133.3 million, consisting of $79.3 million in losses from exercises, $54.5 million in losses from expired contracts, and only $515,000 in profit from open contracts. During the same period, the staking and validation businesses generated only $56.9 million combined—derivative losses were over twice the staking income.
BitMine stated that its options strategy primarily involves selling put options as part of an overall portfolio management plan. While selling put options can generate premium income and allow for asset accumulation during price dips, significant losses occur when market moves against the position and contracts are exercised under unfavorable conditions. This substantial loss clearly demonstrates that the attempt to boost returns using options has currently completely negated the stable income created by node staking operations.
Simultaneously, the company's administrative and general expenses surged from $744,000 a year ago to $37.3 million. Management explained the increase was mainly due to digital asset custody and management service fees, increased salaries, and increased cash and stock-based compensation for directors.
Before adjustments for crypto asset valuation changes, staking revenue was sufficient to cover this quarter's cost of sales and administrative expenses. Even after excluding several non-cash items, the company's own adjusted non-GAAP net loss still reached $70.8 million. This report indicates that the node validation business has generated considerable stable cash flow, but the overall portfolio trading strategy continues to consume staking profits.
Continued Issuance of BMNR Stock to Hoard Ethereum, Shareholder Equity Heavily Diluted
The funds for BitMine's large-scale Ethereum hoarding come almost entirely from public market issuances of common stock, with the cost fully borne by existing shareholders. In the nine months ended May 31, the company sold a cumulative 340.7 million shares of BMNR common stock through its at-the-market offering program, raising $11.87 billion net of issuance costs. Over the same period, it spent $11.69 billion purchasing Ethereum.
Shareholder equity has been significantly diluted. The number of outstanding common shares increased by 149% over nine months, from 232.4 million shares as of August 31, 2025, to 579.7 million shares by the end of May 2026. The issuance continued after the quarter-end, with total shares reaching 603.2 million as of July 9.
Relying on equity financing, BitMine held a cumulative 5.42 million Ethereum as of May 31, with a comprehensive carrying cost of $19.05 billion. At the time of writing, the holding had increased to 5.7 million Ethereum.
BitMine's Key Metrics, Source: BitMine Tracker
The market value of this Ethereum holding was only $10.86 billion at the end of May, representing a paper loss of approximately $8.2 billion, or a 43% unrealized loss.
This holding impairment is the primary source of the company's $9.04 billion unrealized loss on digital assets for the first nine months of this fiscal year, during which the company's cumulative net loss was $9.1 billion. The massive paper loss vividly illustrates that BitMine's share issuances to buy Ethereum at high prices place all the risk on shareholders.
A shareholder meeting in January this year approved increasing the company's authorized common share ceiling from 500 million shares to 50 billion shares. This authorization does not obligate the company to issue all shares but gives management ample room to continue issuing stock for purchasing digital assets and other investments.
BitMine notes that its ability to expand its Ethereum holdings is highly dependent on continued access to financing channels. A decline in Ethereum's price, weakness in the company's stock price, or waning investor appetite for its offerings could raise future financing costs or even limit the company's ability to issue securities on favorable terms.
The viability of this business model depends not only on staking annualized returns and future Ethereum price appreciation but also on shareholders accepting significant equity dilution and the company's portfolio carrying billions in paper losses for years, while continuously providing capital for its coin hoarding.
Long-Term Service Contracts Increase Staking Operational Costs, Squeezing Profit Margins
BitMine relies on its staking business to hedge portfolio price volatility, but the accompanying long-term cooperation agreements generate fixed fees and profit-sharing, continuously squeezing overall profits. The company has a ten-year consulting agreement with third-party service provider Ethereum Tower, incurring an expense of $12.8 million this quarter, accounting for roughly 28% of total staking revenue for the period. Cumulative expenses for this agreement totaled $37.5 million for the first nine months; the company estimates annual costs in the range of $40-50 million, calculated on a tiered basis according to the total value of custodial digital assets.
This agreement can only be terminated under a few specific conditions. If BitMine terminates the agreement without cause, it must pay Ethereum Tower 85% of all estimated service fees for the remaining contract term.
Additionally, following the acquisition of node operator Pier Two, BitMine entered a separate ten-year managed services agreement. This agreement grants Ethereum Tower a 2% equity stake in the MAVAN platform, with monthly revenue sharing based on the proportion of native staking rewards generated by the platform. As of May 31, the company had not yet recognized any expenses related to this agreement, so the sharing cost has not yet impacted the staking business profit statement.
BitMine states that the vast majority of its Ethereum is staked through MAVAN, and in the long run, staking rewards are sufficient to cover asset custody costs. At an operational level for this quarter alone, staking revenue did cover sales and administrative expenses excluding crypto asset valuation changes. However, when factoring in the decade-long fixed consulting fee, future profit-sharing, and various asset management expenses, relying solely on staking income cannot fully measure the business's true profitability.
BitMine Has No Debt, but Reliance on Capital Markets Deepens
As of the end of May, BitMine's balance sheet showed extremely low leverage, with $340.3 million in cash, working capital of $433.1 million, and no traditional debt. The company's total assets stood at $11.63 billion, with total liabilities at only $30.1 million, the vast majority of assets being digital assets like Ethereum. On paper, the company faces no immediate solvency crisis, but operating activities used $287.6 million in cash during the first nine months. The company attributes this cash burn mainly to legal, consulting, and investment banking fees related to the expansion of its Ethereum holdings and fundraising.
After the quarter ended, BitMine issued another 3.5 million shares of its 9.5% annualized perpetual preferred stock, BMNP, raising $273.8 million. This issuance provides short-term liquidity but adds a new rigid annual dividend expense of $32.25 million for the preferred shares. While these securities are equity, not debt, they rank senior to common stock for distributions, and the high dividends continuously consume company cash flow.
Management believes existing cash, anticipated operating cash flow, and its at-the-market offering facility are sufficient to fund operations for at least the next 12 months. This assessment assumes capital markets remain open for financing. Should Ethereum prices remain depressed long-term, the company's stock price weaken, or investor appetite wane, the company's financing costs would rise, limiting operational flexibility.
In summary, BitMine's latest financial report paints a picture of conflicting realities: On one hand, the company has built a mature staking business generating tens of millions per quarter, capable of covering core operating expenses. On the other hand, massive options losses completely devour staking profits, long-term contracts persistently increase management costs, Ethereum hoarding expansion relies entirely on stock issuance, and the total share count has more than doubled.
Therefore, BitMine's long-term economic viability depends on whether staking revenue can stably cover various asset management costs and options losses, whether the company can maintain consistent access to equity financing, and whether the Ethereum price can stage a significant recovery.
