BitMine's Staking Math Works — If You're Not a Common Shareholder

BitMine's chairman Tom Lee said today that the company has no reason to sell Ethereum. His reasoning: staking rewards projected at roughly $300 million a year easily cover the $30 million to $35 million in annual preferred dividends. The math on that specific claim checks out. The question it doesn't answer is what common shareholders actually get.

To understand the structure, you need to see how BitMine built its position. The company, chaired by Tom Lee of Fundstrat, has bought more than 5.8 million ETH — about 4.8% of the total supply. It raised that buying power the same way Michael Saylor's Strategy acquired Bitcoin: by issuing shares. BitMine's common shares went from about 2 million outstanding at the start of the previous fiscal year to roughly 540 million today. That is dilution on a scale that is difficult to overstate.

The company calls itself a "Bitcoin and Ethereum Network Company", but in practice it is a leveraged ETH treasury. It holds the tokens on its balance sheet, stakes most of them through its MAVAN validator network, and collects yield. For the quarter ended May 2026, staking revenue was $45.7 million. Annualized from current holdings, management projects roughly $257 million. If every available ETH is staked, that number approaches $300 million.

This is where Lee's argument enters. BitMine issued $280 million of 9.5% perpetual preferred stock (ticker: BMNP) in June. The annual dividend obligation on 3.5 million shares at $100 stated value is $33.25 million. Staking rewards of $257 to $300 million cover that number roughly eight times. Lee said the yields are "well covered," removing any need to sell underlying ETH to pay preferred holders.

That's true, but it's also a floor, not a ceiling. The preferred dividend is the minimum cash that must flow before common shareholders see anything. The real question is what happens with the remainder — the $224 to $267 million in staking rewards that stays after preferred holders are paid.

The answer so far: the company has used most of it to buy more ETH. Lee noted that staking rewards alone accumulate more than 100,000 ETH annually at current rates. Rather than distribute those rewards to common shareholders as cash, BitMine reinvests them. It keeps accumulating. This turns common shareholders into perpetual ETH purchasers — their capital and reinvested rewards continuously compound the company's token stash but do not flow back to their pockets.

That distinction matters because common shareholders have absorbed every dollar of the downside. During the nine months ended May 2026, BitMine reported an unrealized loss of $9 billion on its digital asset holdings. The cost basis of those assets is $19 billion; their fair value at the time was $10.87 billion. Those losses were taken by common equity. The preferred shareholders get their 9.5% regardless. When the ETH price fell, the mark-to-market hit landed entirely on common stock. When ETH rises, preferred holders still get their fixed amount, and only the incremental upside above that flows to common.

This is leverage. The preferred stock acts like a loan — $280 million of fixed-cost capital that BitMine used to buy ETH. The common shares absorb all the volatility above and below the $33 million annual obligation. The company acknowledges the dilution and is attempting to offset it with a $4 billion share buyback program, repurchasing millions of shares weekly since July. But buybacks are not the same as distributions. They reduce share count and increase the ETH-per-share ratio; they don't put cash in the investor's account.

The economics per common share help show what's happening. At a share price in the $21 to $24 range and roughly 540 million shares outstanding, BitMine's market capitalization sits around $11.5 to $13.8 billion. The company's ETH holdings, at roughly $1,928 per token, are worth about $11.2 billion. After subtracting the $350 million liquidation preference of the preferred stock, the common equity claim on those assets is roughly $10.8 billion — close to where the market is currently pricing the stock.

In other words, the stock roughly trades at net asset value on an ETH-per-share basis. The $300 million in annual staking rewards adds yield on top of that, but common shareholders don't receive it directly. The preferred layer takes its $33 million first. The company reinvests the bulk of the remainder into more ETH purchases. What common shareholders get is the ETH price appreciation reflected in the share price — and a slowly shrinking share count from buybacks.

The risk structure is worth noting. BitMine's 52-week range tells the story of the leverage effect: the stock hit $161 at the high and fell to $3.20 at the low. That 50-to-1 swing reflects what happens when a company that issued shares at every price level between $5 and $150 holds a single volatile asset. The company that bought ETH at $4,000 per token has a vastly different per-share outcome than the company that bought at $1,800. Common shareholders who entered at different prices carry different cost bases, but they all face the same $33 million annual preferred obligation sitting above their claim.

There's also the operational risk of being a concentrated position. BitMine holds 4.8% of all ETH in existence. It has stated its goal is 5%, and Lee hinted the company may hold more if enterprises begin adopting ETH as a long-duration asset. A single holding this large creates governance questions — how does a company that controls nearly one-twentieth of a network handle validator responsibilities, regulatory scrutiny, and the possibility that its own accumulation affects the market it trades in? These aren't financial numbers, but they shape the environment the financial numbers exist in.

So what does "no reason to sell ETH" actually mean for the common shareholder? It means the company is not going to liquidate its position to cover obligations. The preferred dividend is small relative to staking income. The buyback program continues. The accumulation keeps growing. The structure is stable — assuming ETH doesn't fall far enough to threaten the preferred coverage ratio, which would require a drop of well over 80% from current levels.

The investment case for a common shareholder boils down to one thing: BitMine is a leveraged ETH position where the leverage comes from preferred stock rather than debt. The cost of that leverage is $33 million a year in dividends. Everything above that flows to common equity, through buybacks and an increasing ETH-per-share ratio. If ETH rises, the common share price rises with it, and the leverage amplifies the move on a per-share basis. If ETH falls, the common share absorbs the full hit, and the preferred obligation doesn't bend.

The staking math Lee described is correct. $300 million in rewards does cover $33 million in preferred dividends. But the sentence he didn't say — because it's built into the capital structure — is that common shareholders funded the purchases that generated those rewards, they absorbed the $9 billion in unrealized losses that preceded them, and they continue to receive the benefit indirectly, through share count reduction and ETH-per-share accumulation, rather than as distributions. That's the trade. Not a broken one, but a specific one. The stock is priced roughly at the net value of its ETH holdings per share. The staking rewards add yield that slowly compounds the position. The preferred stock is the cost of leverage. If you believe ETH is a long-duration hold, the structure works. If you want cash flow from your investment, it doesn't.