Class Action Alleges Supply Issues for Bitcoin Miner Stronghold Digital Mining Caused ‘Significant Losses’ for Investors

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Stronghold Digital Mining faces a proposed class action that alleges the Bitcoin mining company harmed investors financially by failing to disclose significant issues with suppliers and the risk that it could not expand its mining capacity as anticipated. 

The 17-page securities case against Stronghold, its top officers and several underwriters of the company’s initial public offering (IPO) say the crypto mining outfit’s stock, at the time of the suit’s filing on April 14, was trading at a price more than 75 percent below its $19-per-share IPO price. 

“As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s securities, Plaintiff and other Class members have suffered significant losses and damages,” the complaint alleges. 

According to the lawsuit, Stronghold owns and operates two low-cost, environmentally beneficial coal refuse power generation facilities in Pennsylvania. The suit says the company sold during its October 2021 IPO more than 7.6 million shares of Class A common stock at $19 per share, receiving net proceeds of roughly $132.5 million from the offering. 

From there, the lawsuit says that after the market closed on March 29, 2022, Stronghold announced its fourth-quarter and full-year results for 2021, and reported a net loss of $0.52 earnings per share for the quarter. At this time, Stronghold’s CEO highlighted “significant headwinds in our operations which have materially impacted recent financial performance.” 

Upon this disclosure, Stronghold’s stock price fell as much as 32 percent, to close at nearly $7 per share on March 30, the suit states.

The lawsuit contends that the registration statement Stronghold submitted to the Securities and Exchange Commission upon filing for its IPO was “materially false,” was negligently prepared and failed to state that, for one, contracted suppliers, including MinerVa, were “reasonably likely to miss anticipated delivery quantities and deadlines.” Moreover, the statement omitted that, due to strong demand and pre-sold supply of mining equipment in the industry, Stronghold would encounter difficulties in obtaining miners outside of its confirmed purchase orders, the suit states.

The case claims that as a result of the foregoing, Stronghold faced, yet did not disclose, a significant risk that it could not expand its mining capacity as anticipated. 

The lawsuit looks to represent all persons and entities that bought or otherwise acquired Stronghold Class A common stock “pursuant and/or traceable to the Company’s false and/or misleading Registration Statement and Prospectus” issued in connection with its IPO, and who were damaged thereby.

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