Two prominent Bitcoin mining companies, Hut 8 and US Bitcoin, have announced a merger. February 7.
The merged company will have 6 sites
The merger will bring together two Hut 8 sites in Canada and all four US Bitcoin sites in the United States. The combined company will utilize 825 MW of total energy across all six sites. The new company will be able to harness an estimated 5.6 exahash per second (EH/s) of self-mining power across five sites.
Fluctuations in the number of sites included in these estimates are due to ongoing competition. Hut 8 has his third site in Ontario, Canada, which appears to have been shut down due to a power struggle. Additionally, one of the US Bitcoin sites in Niagara Falls, New York continues to operate despite a dispute with the city.
Although today’s agreement is described in the press release as a merger of equals, the new company will operate as “New Hut” or “Hut 8 Corp.” The merger appears to remove all branding associated with US Bitcoin.
Although an agreement has been reached between management and shareholders, a special meeting must be held in the second quarter of this year to finalize the deal.
Hut 8 also offers up to $6.5 million in secure bridge financing for Bitcoin in the US, but not until final loan documents are finalized.
Mining faces challenges
Hut 8 shares are down 8.78% in value today. It is unclear if this is due to the negative reaction to the merger or broader market challenges.
The mining industry is currently facing tough times due to the high cost of electricity and the relatively low market value of Bitcoin. Hut 8 is known as one of the companies affected by these challenges. Earlier this year, the company reported that bitcoin production fell in December as it sold electricity to energy suppliers.
Nevertheless, Hut 8 held about 20% of Bitcoin reserved by listed miners at the end of 2022. It also managed to survive the collapse of competitor Core Scientific, suggesting it is in a relatively strong position.
The merger is expected to increase corporate value. The deal is expected to nearly double Hut 8’s current market capitalization to $990 million, and its shares will be listed on both the Toronto Stock Exchange and the Nasdaq.
Hut 8 shares will be reversed in a 5:1 ratio. In other words, the number of shares decreases, but the value also increases.
