Buyers and sellers: How bitcoin miners are thinking about post-halving M&A

Following the Bitcoin halving, some mining behemoths appear poised to take a more aggressive approach than others when it comes to acquiring machines, properties and even companies.

A number of segment companies have touted their preparedness ahead of the halving, an event after which per-block mining rewards go lower.

After the halving — expected to hit on April 19 or 20 — miners will collect 3.125 BTC for each block it mines, down from the current level of 6.25 BTC.

Industry watchers expect the per-block reward reduction to spur pain for miners, particularly ones with less capital to deploy and higher energy costs.

While there is little doubt consolidation across the space will take place, the specific shape those mergers and acquisitions (M&A) will take — and who will be on each side of the deals — remains up in the air.

Those poised to acquire

The best positioned acquirers appear to be the ones with the biggest balance sheets.

Enter Marathon Digital and Riot Platforms, which each had more than $1 billion worth of combined cash and BTC at their disposal as of March 31.

Marathon Digital executives said it would use the “dry powder” on its balance sheet to help it roughly double its hash rate to 50 exahash per second (EH/s) by the end of 2025.

The company has already started, buying two facilities in Texas and Nebraska — before then purchasing another facility owned by Applied Digital for $87 million in cash.

Adam Swick, the Florida-based miner’s chief growth officer, told Blockworks last week that Marathon could step in after the halving to buy machines and sites from industry peers who “stumble” — or potentially purchase companies outright.

Riot Platforms has focused on buying new mining machines, ordering 66,560 MicroBT machines for $290.5 million in December and 31,500 more miners in February.

The company noted in a news release earlier this month that it intends to deploy these miners in its facilities throughout 2024 and 2025, ultimately raising its self-mining hash rate capacity to 41 EH/s. It also continues to expand upon its facility in Navarro County, TX.

A Riot spokesperson did not immediately return a request for comment on the company’s post-halving M&A strategy.

But more machine buys are very likely for Riot given that it had an option to purchase up to 265,000 more MicroBT miners after its 66,000-plus machine order in December. That would bring its self-mining capacity to 100 EH/s over the long-term, the company has said.

CleanSpark has been vocal about its acquisition intentions, noting it plans to be an active buyer within the post-halving M&A market.

The Las Vegas-based company, like Marathon, has bought sites ahead of the halving, purchasing three facilities in Mississippi for $19.8 million. CleanSpark had about $300 million in cash and 5,021 BTC — worth about $310 million on Tuesday at 12 pm ET — as of March 31.

“We are now looking beyond halving and expect to be highly active over the coming months given that we have the balance sheet and capital tools to make us one of the most aggressive acquirers in the industry,” CEO Zach Bradford said in a statement.

Core Scientific, a mining giant that emerged from bankruptcy in January, is set to be more “pragmatic” when considering infrastructure growth via M&A, CEO Adam Sullivan said last month.

“We’re going to be much more opportunistic on the machine purchase side…in not only 2024, but 2025, because our opportunity to grow our exahash is really within our existing facility base,” he added.

As for Hut 8, CEO Asher Genoot said last month the company does not plan on growing “at all costs” — noting that the decision to build scale or buy scale will depend on the price.

“We’re very active in the M&A markets, but we’re also very cost-conscious,” Genoot noted at the time. “We’re not going to overpay because we know what the cost is to develop ourselves as well, so we’re running both in parallel very aggressively.”

Who could be a seller post-halving?

Applied Digital agreed to sell its facility in Garden City, TX to Marathon last month for $97.3 million as part of a shift in focus to building out its high-performance computing data centers.

A company spokesperson declined to comment about whether it could look to sell more assets or properties after the halving.

Another pre-halving seller is Greenidge Generation, which agreed to sell to NYDIG roughly 25 acres of land and 44 megawatts (MW) of mining capabilities in Spartanburg, SC. The deal closed in November. The deal helped the company reduce its debt by about $85 million in 2023.

But Greenidge has also built its power capacity through acquisitions and development, noted CEO Jordan Kovler. It most recently purchased 12 acres in Mississippi with 32.5 MW of mining capacity.

Kovler added that the company could look to buy private miners and additional properties after the halving.

“We continue to evaluate potential M&A and partnership opportunities, especially those that will help us make progress against our key AI initiatives to expand data center capacity and further grow Greenidge’s access to low-cost power,” he said.

When asked about potentially being a seller, Kovler added: “We are always open to discussing any transaction — [whether] it is a specific site or a merger with another company — provided that the transaction has financial merit and will create value for Greenidge’s shareholders.”

Compass Point Research & Trading analyst Joe Flynn said in an April 9 research note that Stronghold Digital’s debt and limited access to capital markets puts it at a disadvantage to some peers. The company could benefit from selling its “valuable” infrastructure, he added.

Stronghold CEO Greg Beard told Blockworks that if Stronghold is deemed an attractive M&A target by an industry peer, such a deal would be “something to consider.”

Argo Blockchain said in December 2022 it was looking to avoid bankruptcy despite having “insufficient cash” to sustain operations for much longer.

The company last month closed on the sale of its facility in Mirabel, Quebec — using the $6.1 million in proceeds to pay the remaining mortgage on the facility and reduce its outstanding debt to Galaxy Digital.

Argo Blockchain declined to comment on potential further sales.

Big deals between public miners could be sparse

Elliot Chun, a partner at crypto advisory firm Architect Partners, previously told Blockworks he expects “meaningful” mining-related M&A in the second half of 2024 and into next year — noting “a much healthier buyer set.”

But Chun said he doesn’t expect any large publicly traded bitcoin miners to join forces around the halving — barring a play to diversify geographically.

“If you made it through this last cycle, I think you have confidence that [your] growth strategy, as well as your operating acumen, is very high,” he said.

Galaxy analysts wrote in a February report that the better capitalized miners and more liquid miners with low debt levels are more likely to scoop up smaller miners. Private miners that are vertically integrated, or those with low valuations, may be attractive targets as well, they said.

Matthew Schultz, executive Chairman of CleanSpark, said during a Tuesday X Space that “ongoing discussions” have taken place between public mining companies in recent months.

“The issue is when you look at consolidation, the point is to grow and benefit from scale,” he added. “The only reason that a company would be acquired rather than be the acquirer is if they have a less efficient fleet.”

A number of smaller and less efficient miners will be forced to unplug post-halving. While that could present opportunities for consolidation as larger miners look to buy those companies’ data center space, the value of such a firm could extend only to its infrastructure.

“As far as a headline-grabbing transaction, there might be one or two,” Schultz said. “But I think for the most part the majority of the [larger public miners] are well-positioned for halving.”

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