Bitcoin Miner TeraWulf Open to Merger but Focuses on Profitability

  • Sergey Maga
  • 8 July, 2024 08:51
Bitcoin Miner TeraWulf Open to Merger but Focuses on Profitability

TeraWulf, a prominent Bitcoin mining company, has expressed interest in potential mergers to enhance profit margins rather than for expansion’s sake. Kerri Langlais, TeraWulf’s chief strategy officer, emphasized that increasing the number of Bitcoin machines or facilities is only sensible if profitability margins improve. This viewpoint comes amidst expectations of more mergers and acquisitions in the mining sector following the latest Bitcoin halving, according to Cointelegraph.

Langlais stated that TeraWulf would consider inorganic growth opportunities through mergers and acquisitions (M&A). However, expanding merely for growth’s sake, without considering profitability, is not on their agenda. Instead, the company focuses on organic growth at existing sites and ensuring returns for shareholders. Langlais highlighted the importance of discerning capital allocation to generate sustained returns, which helps investors differentiate between profitable and merely growing companies.

The discussion on Bitcoin miner M&A activity arose after Riot Platforms’ unsuccessful attempt at a $950 million hostile takeover of Bitfarms in June. Riot, however, managed to acquire a 14.9% stake in Bitfarms. Additionally, CleanSpark announced a $155 million merger with GRIID Infrastructure on June 27. Langlais predicts more Bitcoin miner M&A offers but notes the challenge of valuation disparities, making it difficult to assess the worthiness of deals.

Bitcoin miners, currently valued based on enterprise value relative to revenue and hashrate, might benefit from a shift towards metrics like profitability and EBITDA—earnings before interest, taxes, depreciation, and amortization. Langlais asserted that “cash is king,” and profitability metrics should become the benchmarks for valuing mining businesses.

Moreover, TeraWulf has diversified some of its capacity into AI and high-performance computing to generate additional revenue streams. Langlais mentioned that Bitcoin miners face substantial hurdles in expansion due to competition for sites and power resources, particularly from hyperscalers securing available power capacity nationwide. This competition drives up land and power prices, reducing the profitability of new Bitcoin mining projects.

Despite these challenges, TeraWulf, which primarily uses nuclear energy for mining, remains confident in its profitability as long as Bitcoin’s price stays above $40,000. Currently, Bitcoin is trading at $55,700, down 4.4% over the last 24 hours and 19.6% over the last month. 

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