Soluna Holdings: Pricing In An Absolute Zero

Summary Soluna Holdings is deeply undervalued, trading near net cash levels despite significant infrastructure and a 2.8 GW development pipeline. The market misprices SLNH as a speculative Bitcoin miner, ignoring its transition to hosting, AI, and high-performance computing infrastructure. Project-level margins are strong, with Project Sophie at 68.4% and Dorothy 1A at 43.6%, supporting positive adjusted EBITDA despite GAAP noise. Key catalysts include Dorothy 2 ramp, Project Kati energization, and AI/HPC contracts; dilution risk remains the primary concern. It is one thing to price a company for a struggle, as the market was doing when Soluna Holdings ( SLNH ) traded around $2 back in December . It is another thing entirely to price it for an immediate, total wipeout. At ~$0.76, we have officially entered the latter phase. The thesis is simple: the market is pricing the company as a distressed, speculative microcap crypto miner and ignoring its successful transition into a cash-rich renewable computing infrastructure platform. With the stock trading not far off its net cash value, I believe the downside is capped, offering a risk-reward profile skewed heavily toward a potential 4x upside as the market wakes up. When I look at the screen today, I see a market cap of roughly $75m . Yet the company’s last balance sheet showed over $51m in cash . Even after subtracting the $23.3m in total debt, you are left with a net cash position of roughly $28m . In my view, the market is saying that the 123 MW of managed data centres, the proprietary Maestro OS software, and the 2.8 GW development pipeline are not only worthless but also a liability . To me, this is like a panicked exit from a messy small-cap ticker as opposed to the efficient market at work. Project Pipeline (Soluna Investor Presentation Jan-26) Infrastructure, Not Just Crypto For those unfamiliar with the name, it is important to understand that Soluna has evolved beyond the typical Bitcoin miner business model. It is now essentially a power-arbitrage infrastructure company. They build modular data centres co-located with renewable energy power plants (mostly wind in Texas) that face the problem of wasted energy that cannot be sold to the grid (curtailment). Soluna buys this stranded power at low costs to run high-density computing tasks. While they started with proprietary Bitcoin mining, they have aggressively pivoted toward a hosting model, i.e. providing the infrastructure for other customers. This derisks their revenue stream from the volatility of Bitcoin prices. This shift is visible in the numbers. In the Q3-25 data, hosting revenue increased to $5.2m, significantly outpacing the $2.7m brought in from proprietary mining. Soluna is now effectively a landlord for high-performance compute, competing less with speculative miners and more with junior data centre infrastructure firms. They are currently managing 123 MW, with the 166 MW Project Kati already through its groundbreaking and under construction . The transition to AI and High Performance Computing [HPC] is the real catalyst. They have already secured an MOU with an HPC partner and have land ready for Kati 2, which is designed specifically for high-density workloads . If they land a firm AI hosting contract, the Bitcoin discount currently suppressing the stock could evaporate overnight. Squinting Through the GAAP Noise Looking only at the $24m net loss reported in Q3, you might want to run for the hills . But that number is a typical example of why GAAP can be misleading for growing companies with complex capital structures. Nearly $22m of that loss was a non-cash fair value adjustment related to warrants . When you strip out one-time professional fees, the compensation catch-ups, and the Preferred B consent fees, the adj. EBITDA (ex. special charges) was actually a positive $58k . However, the project-level performance is where the value is hiding. Project Sophie delivered a 68.4% gross margin in Q3 . Dorothy 1A was at 43.6% . These are the cash-generating engines of the company, but the overall numbers were dragged down by Dorothy 2, which was still in its ramp-up phase. That site is now transitioning to steady-state operations . Paying For The Cash And Getting The Business For Free The math at $0.76 has crossed the line from cheap into absurd. With the stock at this level, we are looking at a market cap of about $75m, with ~$51.3m in cash and equivalents. That's nearly 70% of the company’s entire market valuation backed by cash. If you back out the cash and add in the net debt, you get a total EV of only about $110 million. For that you are getting: 123 MW of active, high-margin hosting and mining operations. A 166 MW project (Kati) that is already under construction. A 2.8 GW development pipeline. Proprietary software (Maestro) that the company claims can optimize power costs in real time. My take is that the market is completely ignoring the forward-looking earnings power here. Management’s own illustrative guide points toward $28m in adj. EBITDA for 2026. Even if you think they are being too optimistic and you cut that number in half to $14m, the stock is trading at a forward EV/EBITDA of just 7.9x. Management Forecast (Investor Presentation Jan-26) If they actually hit those targets? An $110m EV against $28m in EBITDA is a 3.9x multiple. This is a significant valuation gap for a sector where pure-play data centres and AI infrastructure firms often command >18x (see below). Peer Comparison (Seeking Alpha/Finbox) If we assume the company can successfully bring Phase 1 of Kati online and move toward a $40m EBITDA run-rate by 2027 (achievable if they land an HPC partner) and we apply a conservative 10x multiple, we get an EV of $400m. After accounting for the debt and allowing for some further dilution to, say, 140m shares, you get a price target of roughly $2.70 per share. From where I am sitting at $0.76, that is nearly a 4x upside. The risk-reward here is completely skewed in favour of the bulls. You would essentially be buying the operating assets for pennies on the dollar and getting the entire AI/HPC growth story as a free call option. Funding Growth, Not Survival A key concern for Soluna is the dilution trap. Management has been aggressive with their At-The-Market program, raising $20.8m in Q3 alone . However, a closer look at the cash flow statement reveals that the dilution is funding asset growth, not operating losses. In the first 9 months of 2025, the cash flow from operations was just -$3.5m, while $18m was spent on capex to build out Project Dorothy 2 and Kati . With ~$51m in cash on hand and a quarterly operating burn that is flirting with breakeven (adj. EBITDA of $58k in Q3), Soluna has a significant cash runway for its operations. While the dilution effectively caps the per-share upside in the short term, the risk of bankruptcy appears negligible. In my view, the balance sheet is robust enough to weather a crypto winter, meaning that $0.76 is a distressed price for a company that is simply in a heavy build phase. What Moves The Stock The most immediate catalyst is the ramp of Dorothy 2, as Q3 only saw a partial contribution. A clean Q4-25 or Q1-26 print showing Dorothy at full capacity would prove the earnings power of the Texas sites . The second is Project Kati Phase 1 (48 MW) energisation slated for 2026 . If they hit their construction milestones there, it becomes very hard for the market to keep valuing the pipeline at zero. Finally, any firm news on the AI/HPC front at Project Kati 2 or Grace may shift the narrative . The market is currently giving them zero credit for their 2.8 GW pipeline. An AI partnership could put a floor on those megawatts that is significantly higher than the current stock price . As for negative drivers, in addition to the dilution trap noted, there is also the Bitcoin hashprice risk. If mining difficulty continues to skyrocket while Bitcoin stays flat, their hosting customers might struggle to pay the bills . However, this is mitigated by Soluna moving to more stable volumetric (fixed-fee) hosting contracts, which I think is the right move for an infrastructure-first model . The Risk-Reward Is Skewed My belief is that at $0.76, the market is selling off Soluna with the wider market at exactly the time when the operational milestones are actually being hit. You are getting a business that is cash-flow positive at the project level and sitting on a pile of cash for not much more than the value of that cash . This stock is going to continue to be volatile, b ut from what I can tell, the downside is being protected by the balance sheet, while the upside, if they execute on even a fraction of their 2.8 GW pipeline, is massive . I think the market is missing the forest for the trees here.