Bitcoin mining firm TeraWulf says it would consider a merger if there’s an opportunity to widen profit margins — but not if it’s merely for “empire building,” according to its chief strategist.
It comes amid expectations of more mergers and acquisition (M&A) offers in the mining sector following the latest Bitcoin halving.
“We will certainly consider inorganic growth opportunities through M&A [but] expanding merely for growth’s sake, or empire building, without considering profitability makes no sense,” explained Kerri Langlais, TeraWulf’s chief strategy officer in an interview with Cointelegraph.
While other publicly-listed Bitcoin (BTC) miners have set targets to reach hashrate milestones, Langlais said TeraWulf focuses more on “organic growth” at its existing sites and shareholder returns.
“Our success hinges not merely on the speed of our expansion but on the discerning allocation of capital to generate sustained returns for our shareholders,” Langlais said.
“This distinction is crucial; it enables investors to differentiate between companies that are growing profitably versus simply growing.”
Discussions about incoming Bitcoin miner M&A activity came up when Riot Platforms attempted a “hostile” takeover of Bitfarms with a $950 million buyout offer in June, which ultimately failed.
Riot did, however, manage to snare a 14.9% stake in Bitfarms.
Bitcoin miner CleanSpark also announced a $155 million merger with Griid Infrastructure on June 27.
TeraWulf’s Langlais expects to see more Bitcoin miner M&A offers, but he also notes a large “disparity in valuations,” which makes it difficult to determine which deals are worth pursuing.
Bitcoin miners are currently valued based on their enterprise value relative to revenue and hashrate, but Langlais would like to see a shift toward profitability and EBITDA — earnings before interest, taxes, depreciation and amortization — like traditional commodities businesses:
“‘Cash is king,’ and metrics like EBITDA, profitability, and free cash flow yield should become the benchmarks for valuing mining businesses moving forward.”
Bitcoin miners will struggle to expand
TeraWulf is one of several Bitcoin miners that has diverted some of its capacity to other ventures, such as AI and high-performance computing, diversifying revenue streams.
Langlais said Bitcoin miners could face substantial hurdles in expanding due to emerging competition for sites and power resources.
“Hyperscalers are quickly securing every available power capacity nationwide, competing for the same locations traditionally sought after by BTC miners,” Langlais said. “This intense competition is driving up land and power prices, thereby diminishing the profitability of new BTC mining projects.”
Related: Bitcoin miners ‘near capitulation’ as profits dry up alongside BTC sell-off
Profitability margins have been an industry focal point after the fourth halving event saw the block subsidy sliced by 50% to 3.125 BTC on April 20, which is worth around $174,100.
Langlais said TeraWulf — which mines most of its Bitcoin with nuclear energy — will remain profitable provided Bitcoin’s price stays above $40,000.
Bitcoin is trading at $55,700 at the time of writing, down 4.4% over the last 24 hours and 19.6% in the past month.
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