Two notable Bitcoin mining companies, Hut 8 and US Bitcoin, have announced a merger as detailed in a press release issued on February 7.
The combined company will have six sites
The merger will combine two of Hut 8’s locations in Canada with US Bitcoin’s four locations in the United States. The combined venture will use 825 megawatts of gross power across the six sites. The new company will be able to leverage approximately 5.6 exahashes per second (EH/s) of self-mining power at five sites.
The variation in the number of sites included in these estimates is due to ongoing conflicts. Hut 8 has a third location in Ontario, Canada, which has apparently been shut down due to a power dispute. Additionally, a US bitcoin site in Niagara Falls, NY, is locked in a dispute with the city but remains operational.
Although today’s deal is described as a merger of equals in the press release, the new company will operate as “New Hut” or “Hut 8 Corp.” The merger will apparently remove any branding related to US Bitcoin.
While an agreement has been reached between executives and shareholders, a special meeting is yet to close the deal in the second quarter of this year.
Hut 8 will also provide US Bitcoin with secured bridge funding of up to $6.5 million, but not until final loan documentation is complete.
The mining industry faces challenges
Hut 8 stock value is down 8.78% today. It is unclear whether this is due to a negative response to the merger or to broader market challenges.
The mining industry is currently facing difficult circumstances due to the high cost of electricity and the relatively low market value of Bitcoin. Hut 8 is known to be one of the companies affected by these challenges: earlier this year, the company reported a drop in Bitcoin production in December, as it sold electricity back to its energy supplier. .
Hut 8 nevertheless held around 20% of the Bitcoin reserved by exchange-listed miners at the end of 2022. It also managed to survive while its competitor Core Scientific failed, suggesting that it is in a relatively strong position.
The merger should improve the value of the company. The deal is expected to roughly double Hut 8’s current market capitalization to $990 million, and its shares will be listed on both the Toronto Stock Exchange and Nasdaq.
Shares of Hut 8 will be aggregated in a five-to-one ratio, meaning the shares will be reduced in number but will also receive an increase in value.