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A deeper look at Hut 8’s imminent merge with US Bitcoin Corp

source-logo  blockworks.co 08 September 2023 21:32, UTC

Hut 8 Mining is preparing to merge with US Bitcoin Corp in an “all-stock equal merger.” The deal is expected to conclude by the end of the month, as the shareholder voting period nears its end.

The transaction, first revealed in February, is set to bolster Hut 8’s mining capacity and further diversify its revenue streams — giving the firm “arguably the most diversified business model among public peers,” one industry watcher said.

The combined company is set to be called Hut 8 Corp., and will be based in the US. It intends to list its shares on both the Nasdaq and the Toronto Stock Exchange, trading under the symbol “HUT”.

Advisory firms Institutional Shareholder Services (ISS) and Glass Lewis & Co. recommended for Hut 8 shareholders to approve the deal last month. The deadline is Friday, and votes will be counted on Sept. 12.

The stockholder approval process for US Bitcoin Corp will begin once Hut 8’s registration statement is effective. A final order from the Supreme Court of British Columbia, set for Sept. 15, is also required for the transaction to close.

If the necessary approvals are obtained, the merger could be finalized on Sept. 30, Hut 8 said in an Aug. 30 statement.

Significance of the deal

Wolfie Zhao, head of research at TheMinerMag — the research arm of mining consultancy BlocksBridge — noted that Hut 8 and US Bitcoin Corp are complementary to each other in terms of bitcoin balance, capital expenditures intensity, cost of production and geographic footprint.

“Following the merger, [Hut 8] will become yet another mining giant that has multiple sites scattered across Canadian provinces and US states with arguably the most diversified business model among public peers — including self mining, hosting, site management and [high performance computing],” he told Blockworks.

Hut 8’s installed hashrate was 2.6 exahash per second (EH/s), as of June 30. The company reported year-over-year revenue and bitcoin production declines in this year’s second quarter.

Read more: Hut 8 endures Q2 challenges, but ‘bullish on a diversified strategy’

With campuses in New York, Nebraska and Texas, US Bitcoin Corp operates hundreds of megawatts of bitcoin mining infrastructure independently, and on behalf of clients.

The combined company expects its self-mining capacity to hit 7.5 EH/s across six mining facilities.

Riot Platforms and Marathon Digital — among the Hut 8’s largest rivals — had hash rates of 10.7 EH/s and 19.1 EH/s, respectively, as of Aug. 31.

US Bitcoin Corp.’s portfolio of owned and managed sites accelerates Hut 8’s growth trajectory via greater operating scale, advisory firm Architect Partners said in a February research note. The combination also allows Toronto-based Hut 8 to add hydro, wind and nuclear energy sources, it added.

“In addition, the combined entity now has numerous revenue lines besides self-mining, including hosting other miners, data center management, equipment sales, and rig repairs,” the Architect Partners note states. “This lessens the dependency on the price of bitcoin for “New Hut” and allows for the inclusion of fiat-generating businesses.”

Indeed, Hut 8 CEO Jaime Leverton said in an August statement that Hut 8 is “not here to simply chase exahash” — adding during the company’s second quarter earnings call that diversifying its business is critical before the next bitcoin halving slated for April.

The company boosted its high-performance computing capabilities in 2022, and is set to take advantage of US Bitcoin Corp’s hosting and managed infrastructure operations, the CEO noted.

“We’re very much bullish on a diversified strategy,” Leverton added last month. “But I think across our space you’re going to just continue to see miners evolve their businesses in different ways.”