Summary Bit Digital recently completed a $150 million convertible note offering, with the proceeds used to purchase Ethereum. The company has transitioned from a Bitcoin miner and ETH DAT to a pure ETH DAT with HPC/AI exposure through its WhiteFiber spin-out. At current price levels, BTBT stock is trading at nearly a 13% discount to what I feel is a conservative net asset value estimate. I believe BTBT shares should be priced closer to $4.45. Back in early July, when I last covered Bit Digital ( BTBT ) for Seeking Alpha, I reiterated a cautious sentiment that I have had with the stock going back the last year or so. My BTBT Coverage History (Seeking Alpha) Prior to flipping to more neutral in December 2024, I had written 6 consecutive BTBT articles labeling the stock either a 'buy' or a 'strong buy' between March 2023 and August 2024. My general feeling on Bit Digital over these last few quarters has been that the company betting on Ethereum ( ETH-USD ) over Bitcoin ( BTC-USD ) had been detrimental to its returns due to Ethereum's significant underperformance against the top Digital Asset. That has certainly changed: TrendSpider After bottoming out against Bitcoin in April, Ethereum has performed incredibly well over the last five months. Fundamentally speaking, I'd argue very little has actually changed with the long-term ETH thesis over that period of time. Yet, driven by the surge in Ethereum-based DAT companies in the public equity market, of which Bit Digital can now be considered one, BTBT shares are interesting once again. In this update, we'll get an updated look at a fair value estimate for BTBT shares now that the company has essentially exited the Bitcoin mining business and sold $150 million in convertible notes to start October. Convertible Notes At the end of September, Bit Digital announced the pricing on its upsized convertible note offering that was disclosed earlier in the month. With the exercising of an additional $15 million in underwriting options, Bit Digital's total convertible note sales were $150 million at a conversion price of $4.16 per share. The table below breaks down the potential BTBT dilution from converts as follows: Convertible Note Details Raised $150,000,000 BTBT Shares per $1,000 240.4 $1,000 Allotments 150,000 BTBT Shares from converts 36,057,690 Source: Bit Digital, Author's calculations Given the company had 321.4 million shares outstanding at the end of September, 36 million additional shares isn't necessarily a small amount of dilution. However, there is some credence to the idea that this is a good long-term strategy for Bit Digital, but it largely hinges on whether Ethereum's price goes up or down. Importantly, the notes are unsecured obligations that pay 4% annually and come due in October 2030. This means Bit Digital's annual note liability is $6 million over the next 5 years. With the proceeds from the convertible note sales, Bit Digital purchased 31,057 ETH tokens. During the month of September, the company earned a 3.37% annualized yield on its staked ETH and generated 291 ETH during that period. At current prices, Bit Digital is generating $15.8 million in ETH through staking rewards annually. And this doesn't include any ETH that would be staked following the convertible note raise. Assuming that the newly purchased ETH is also put to work and starts generating yield, a s long as Ethereum remains above Bit Digital's ETH purchase price with the convertible note proceeds, the 4% annual note obligation is almost entirely covered by the company's 3.37% annualized ETH rewards. If you are of the view that ETH will continue to appreciate over the next five years, this looks like pretty good capital allocation from where I sit. Balance Sheet Considerations While a lot has changed since the company's Q2 report, at the end of June, Bit Digital had a considerably attractive balance sheet with over $723 million in total assets and just $90.2 million in total liabilities: Data by YCharts The company's liquidity position was strong, with over $181 million in cash and equivalents. Again, this was at the end of June, and the company is already through Q3 from an operational standpoint. But I still think Bit Digital has a terrific liquidity setup if I'm following the announced moves accurately. In early July, Bit Digital sold BTC and used equity to bring its ETH stack over 100k coins. Roughly a week later, Bit Digital bought another 20k in ETH through a $67 million private placement. That brought the company's ETH stack over 120k ETH. And we also know that the latest 31k ETH buy was done with convertible notes. As far as I can tell, Bit Digital's cash position should still be quite robust when the company reports earnings for Q3. Fair Value NAV Estimate Even if we assume $40 million in COGS and SG&A during Q3 - which I actually think could be aggressive - Bit Digital likely had well over $100 million in cash liquidity at the end of September. While most DAT companies calculate basic mNAV by dividing the common stock market cap from the crypto treasuries held, Bit Digital's valuation is a bit more complex due to its majority ownership of WhiteFiber ( WYFI ). That company has a $1.3 billion market cap and Bit Digital owns roughly 75% of those shares. Considering the company's ETH position, WhiteFiber shares, and potential convert dilution, I'm estimating BTBT fair value like this: As of 10/8/25 Unit Value Total Value Shares Outstanding 321,435,847 $3.88 $1,247,171,086 WYFI Shares 27,043,749 $34.33 $928,411,903 ETH Balance 153,244 $4,441.99 $680,708,316 Asset value $1,609,120,219 Convertible notes/payments $180,000,000 NAV $1,429,120,219 NAV Discount 12.73% Source: Bit Digital, author's estimates Notably this estimate doesn't include the $90 million in Q2 liabilities or the $100+ million in assumed cash and equivalents. But again, I think it's reasonable to assume Bit Digital still maintains a negative net debt position at the end of September. So if we're solely analyzing BTBT stock from its ETH, WYFI, and 5 year convertible obligations, the company is trading at nearly a 13% discount to its liquid investments. Based on this calculation method, I believe BTBT shares are worth closer to $4.45. Key Risk It's admittedly tough to determine what 'fair value' is in the Digital Asset realm. Bit Digital's value is now derived primarily from two major assets that it holds; Ethereum and WYFI stock. Each of these assets is highly volatile and could fall dramatically in price. As each week goes on, it seems there are increasingly more analysts and reporters in the investment community that are questioning AI valuations. In a re-rating of AI/HPC, WhiteFiber stock is unlikely to be immune. Closing Summary We can only trade and invest in the market we have, not the one that we might want. In a world where DATs drive crypto prices and AI names are priced for perfection, BTBT stock is actually a compelling opportunity. As I see it, it's considerably undervalued relative to its net assets, and that undervaluation could actually be even bigger if the company is still holding $150 million in cash/equivalents. While I personally hold shares of the company and have been quite happy with performance over the last month or so, I'll reiterate the 'hold' here purely because of my concerns about the AI bubble bursting.
