According to a press release released on February 2, two well-known Bitcoin mining companies, Hut 8 and US Bitcoin, have declared a merger. 7.
The Combined Company Will Have Six Sites
Two Hut 8 sites in Canada will be combined with all four US Bitcoin sites in the US as a result of the merger. All six locations will be used by the combined company to generate 825 megawatts of gross energy. An estimated 5.6 exahashes per second (EH/s) of self-mining power will be available to the new business across five sites.
Conflicts that are still going on account for the variation in the number of sites included in those estimates. Hut 8 has a third site in Ontario, Canada, but it appears to have been shut down due to a power issue. Also, despite being embroiled in a legal battle with the municipality, one US Bitcoin exchange in Niagara Falls, New York, is still running.
Though today’s agreement is described as a merger of equals within the press release, the new company will operate as “New Hut” or “Hut 8 Corp.” All branding associated with US Bitcoin is reportedly going away after the merger.
Even though executives and stockholders have reached a consensus, the deal still needs to be finalized at a special meeting in the second quarter of this year.
Additionally, Hut 8 will offer secured bridge financing for US Bitcoin up to $6.5 million, but only after the completion of the final loan documents.
The Mining Industry Faces Challenges
Today’s decrease in Hut 8 stock value is 8.78%. Whether this is a result of a poor reaction to the merger or more general market difficulties is unclear.
The mining industry is currently dealing with difficult conditions as a result of the high cost of electricity and Bitcoin’s relatively low market value. Hut 8 is well-known for being among the businesses impacted by these difficulties; earlier this year, the company reported a decline in Bitcoin output in December as a result of selling back power to its energy provider.
Nevertheless, as of the end of 2022, Hut 8 still held about 20% of the Bitcoin reserved by publicly traded miners. Additionally, it managed to remain in business while Core Scientific, a rival, failed, indicating that it is in a relatively strong position.
The company value should increase as a result of the merger. According to projections, the transaction will roughly double Hut 8’s current market capitalization to $990 million, and its stock will be listed on both the Nasdaq and the Toronto Stock Exchange.
Hut 8 shares will be consolidated at a ratio of five to one, resulting in a decrease in the number of shares but an increase in the value of each share.