Who might have imagined that when GRIID Infrastructure was launched in 2018, it would announce a $3.3 billion SPAC merger in just 4 years, only to end up being compelled to agree to an effective take-under by CleanSpark in an all-stock deal for just $155 mm of enterprise value?
GRIID Infrastructure has become the latest saga in the ever so exciting world of bitcoin mining.
The company was all the rage in 2021 when Bitcoin rallied to its then all-time high. It secured a $525 mm credit facility from Blockchain.com and entered into a definitive merger agreement with Adit EdTech Acquisition Corporation to list on the New York Stock Exchange. The $525 mm four-year term credit facility was supposed to help GRIID Infrastructure to scale up operations to capitalize on over 1,300 megawatts of available power from existing energy generation partners. The deal valued to combined company at $3.3 billion. The miner was expected to receive approximately $246 million in cash from the acquisition corporation at closing. At the time, CEO Trey Kelly boasted “We are building an American infrastructure company with the largest pipeline of committed, carbon-free power among public bitcoin miners at the lowest cost of scaled production.”
GRIID Infrastructure was billed as a profitable, vertically integrated bitcoin self-mining company with planned mining capacity of 734 megawatts (MW) operational by 2023 with a power cost of less than $25/MWh. Investors were guided to fiscal year 2023 revenue of $1.6 billion on the back of GRIID management’s reported 1,300 MW of power. Breakeven bitcoin production costs were proclaimed to be materially below its peers and a cost of scaled bitcoin production of under $6,225 per Bitcoin.
The planned listing on the New York Stock Exchange, originally targeted for the first quarter of 2022, never came to fruition. The crypto winter proved to be an existential threat. GRIID Infrastructure defaulted on its credit facility in the summer of 2022 and was forced to restructure.
GRIID Infrastructure would not make its public markets debut until January 2024. Rather than on the New York Stock Exchange, GRIID listed on the CBOE Canada. Later that month, shares of GRIID began trading on the Nasdaq Global Market.
Despite all the fanfare, GRIID today operates just three bitcoin mining data centers in Tennessee and one in New York. According to regulatory filings, GRIID had accumulated $114 mm in losses as of March 31st, 2024. Total available power capacity was just 68 MW.
Yesterday, the company agreed to a definitive merger agreement pursuant to which CleanSpark will acquire all the issued and outstanding common stock of GRIID in an all-stock transaction. The total enterprise value, including payment and assumption of debt, of the transaction is just $155 million. By all accounts, this transaction crystalizes unrealized losses in the neighborhood of 90% for investors in the $10 a share business combination less than 6 months ago.
The fact that CleanSpark will assume all outstanding debt of GRIID pursuant to the merger while simultaneously providing GRIID with a $5 million dollar working capital loan and a pay-down bridge loan of approximately $50.9 million, secured senior vis-a-vis all other outstanding debt of GRIID, suggests this transaction was a fire-sale to stave off bankruptcy.
The only winner here is CleanSpark. With this acquisition, the country’s second largest public miner by market capitalization, CleanSpark is looking to replicate its successful build out of 400 MW in Georgia in the neighboring state of Tennessee. The new owner is looking to exceed 100 MW of power capacity in 2024, ramping up to 200 MW in 2025 and finally exceeding 400 MW by 2026.
The principal take-away? Investors beware. This industry is not for the faint of heart.
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