A Pennsylvania Bitcoin mining company that went public two months ago is buying thousands of computers and, separately, has a deal in place to provide fresh power.
Stronghold Digital Mining Inc. on Monday announced four separate agreements to acquire 9,080 Bitmain and MicroBT Bitcoin miners — actually computers — which will be installed at its Pennsylvania facilities.
Stronghold (NASDAQ: SDIG) also said that on Dec. 15, it entered into an equipment financing agreement with NYDIG ABL LLC for up to $54 million and has so far received $18.6 million, about one-third of the total.
Stronghold owns two plants — Scrubgrass in Venango County and Panther Creek in Carbon County — that convert coal refuse into power which is then used to mine Bitcoin, the digital asset that is the best-known cryptocurrency. The company also added a Pittsburgh office in the Strip District last month and, according to social media posts, is looking to add staff in multiple positions including several leadership roles.
Stronghold said it expects 4,800 of the miners to be delivered by early January. The purchase price was $35.7 million. The remainder are anticipated to arrive during the first half of 2022; These were acquired under a profit share arrangement with Stronghold’s existing partner, Northern Data.
“During our third quarter earnings call (on Nov. 30) we told our investors that we would continue to opportunistically procure miners from a variety of sources, as dictated by expected return profile and available capacity, and that is what we did over the last two weeks,” Greg Beard, Stronghold co-chairman and CEO, said in a release. “We believe these miner purchases further our rapid growth strategy, and the near-term delivery schedules for the open-market purchases enhance expected return profiles and mitigate timing risk. Additionally, the expansion of our profit share arrangement demonstrates our ability to creatively structure partnerships with industry leaders with a return profile that we believe is extremely attractive. These purchases also highlight one of the key benefits of our low-cost, vertically integrated business model: we have access to power and capacity to plug in miners.”
Beard said equipment financing is Stronghold’s preferred non-equity source of capital.
“We have been encouraged with recent developments in the miner equipment finance market, which is becoming more competitive, making terms more attractive for Stronghold,” he said. “We expect to continue utilizing modest amounts of equipment financing with both existing and new partners, along with cash on the balance sheet and opportunistic monetization of our Bitcoin holdings, to continue funding our growth plans.”
Stronghold’s initial public offering on Oct. 20 resulted in net proceeds of $132.5 million earmarked for general corporate purposes including acquisitions of miners and power generating assets. It takes a lot of electricity to mine Bitcoin, which entails having computers compete to solve increasingly complex math problems: the first that solves the problems is awarded newly created Bitcoin.
Stronghold’s stock has been trading at the low end of its $10.43 to $35.79 per share range. It closed on Monday at $10.87 per share.
