A prominent London and Wall Street Bitcoin mining company has disclosed plans to deepen its market presence through a potential asset acquisition and financing deal. The intention is to acquire assets from GEM Mining, which could enhance the company’s mining capacity by potentially doubling its outputs.
The proposed arrangement would involve a purchase worth up to $21.7 million in company shares, in addition to a $10 million investment sourced from GEM’s institutional backers. If finalized, the transaction could inject 2.4 exahash of mining power into existing operations, thereby significantly augmenting Bitcoin production capabilities.
The leadership believes that this transaction is a critical move towards achieving profitable growth and fortifying the overall capital structure. Discussions and collaborative efforts with GEM to finalize due diligence and legal documentation are currently ongoing.
The asset acquisition is to be executed through the issuance of new ordinary shares, beginning with an initial value of $11.7 million and contingent payments of up to $10 million based on the operational hashrate performance over the next year. The initial share price for this consideration is set at 3.4 pence, based on recent market evaluations.
This announcement follows just days after the appointment of a new Chief Executive Officer, who brings prior experience from a digital infrastructure company and has previously held a significant role in the Bitcoin mining sector. The new CEO takes the reins from an individual who guided the company through challenging times and managed to avert bankruptcy while settling a substantial loan.
Despite these management changes, the company still faces considerable challenges, as detailed in its latest financial reports. The previous CEO had successfully navigated the company through tumultuous financial waters, yet profitability remains elusive. Recent figures indicated a 30% drop in revenue, alongside a decrease in daily Bitcoin production to 1.3 BTC. Mining margins experienced a significant contraction, falling from 58% to merely 8%, while net losses increased to $6.3 million.
Despite these setbacks, the new leadership is optimistic, asserting that a strong foundation exists and that there’s potential for recovery and growth.
The financial structure of the acquisition involves a $7 million secured convertible note, which offers an 8% annual interest rate, paired with a $3 million equity investment. These financing details would be priced favorably, set at a 25% discount relative to the company’s share price at the time of closure. Additionally, upon successful completion of the deal, GEM would gain the right to appoint two members to the company’s board of directors.
The company is known for its commitment to sustainable cryptocurrency mining, principally operating its facilities powered by renewable energy sources across Quebec and expanding offices in North America and the UK.
Financial advisors for this potential deal include Stifel for the mining company and Compass Point for GEM Mining, showcasing the strategic steps being taken to bolster and enhance future mining capabilities while transitioning to new leadership during a critical phase.