Bitcoin Miner Cipher Mining to go Public via SPAC
Posted on 03/05/2021
Rye, New York-based Cipher Mining Technologies, Inc. is a newly formed U.S.-based Bitcoin mining operation, and Good Works Acquisition Corp. (Nasdaq: GWAC), a U.S. publicly-traded special purpose acquisition company, announced they have entered a definitive agreement for a business combination. Upon closing of the transaction, the combined company will be named Cipher Mining Inc. (“Cipher” or the “Company”) and is expected to be listed on the Nasdaq under the new ticker symbol “CIFR”. The Good Works SPAC was run partly by Cary Grossman, a co-founder of Shoreline Capital Advisors, Inc.
Cipher Mining is a newly formed subsidiary of Bitfury Top HoldCo B.V. (“Bitfury” and, together with its subsidiaries, including Bitfury Holding B.V., “Bitfury Group”). The Bitfury Group is a provider of Bitcoin mining hardware and other blockchain software and services. Since its inception in 2011, Bitfury Group has deployed more than 500+ MW of computing power and mined more than 600 thousand Bitcoin. As a stand-alone company, Cipher is expected to be positioned as a U.S.-centric Bitcoin mining champion with potential to reach a cumulative deployed capacity of 745MW by the end of 2025. Cipher Mining’s U.S.-based data centers are planned to come on-line between Q4 2021 and Q2 2022 with a total of 445MW of power capacity and planned expansion of an additional 300MW deployed between 2023 and 2025. As the projected largest scale mining platform in the U.S., Cipher hopes to provide investors the opportunity to invest in the Bitcoin industry through a mining company operating in a highly transparent and well-regulated environment. Bitfury was formed in 2011. Investors in Bitfury include iTech Capital, Lian Group, Macquarie, Naver Ventures, Jabre Capital Partners, Dentsu Ventures, Argenthal, Blockchain Capital, Daiwa Securities Group, Karelya, Galaxy, and others.
Cipher’s contractual relationship with Bitfury Group is also expected to provide the Company with compelling value via access to best-in-class mining equipment and proven on-site operations development, management, and maintenance experience.
The transaction values the combined company at an enterprise value of US $2 billion. Pursuant to the merger and following the share exchanges, the combined company is expected to receive approximately US$ 595 million in gross cash proceeds from a combination of cash from a US $425 million fully committed stock PIPE, including a $50 million investment in-kind from Bitfury, and approximately US$ 170 million in cash held in Good Works’ trust account from its initial public offering in October 2020, assuming no public shareholders exercise their redemption rights at closing requiring payment from Good Works’ trust account. Cash from the transaction, net of transaction fees, will be used to fund the planned build out of the mining facilities of the company.
Sources of Funds 1. Cipher rollover equity: US$ 2,000 million 2. Good Works Acquisition Corp. rollover equity: US$ 170 million 3. PIPE: US$ 425 million
The PIPE is anchored by institutional investors including funds and accounts managed by Fidelity Management & Research Company and Counterpoint Global (Morgan Stanley). Current Cipher Mining shareholders will become the majority owners of the combined company at closing with approximately 70% ownership in the pro forma company and all existing shareholders and investors will continue to hold their equity ownership subject to a two year lock-up period. The PIPE investors, including Bitfury, will own approximately 15%, Good Works, inclusive of its founder shares will own approximately 7.5%, and Cipher employees will own approximately 7% of the pro forma company at closing.
J.P. Morgan Securities LLC is serving as exclusive advisor and lead placement agent to Good Works, and Wells Fargo Securities, LLC is serving as lead financial advisor to Cipher Mining. Wells Fargo Securities, LLC is also serving as co-placement agent on the PIPE.
Schiff Hardin LLP is acting as legal counsel to Good Works. Latham & Watkins LLP is acting as legal counsel to Cipher Mining. Mayer Brown LLP is acting as legal counsel to the placement agents.
Some Large Bitcoin Miners
1. Argo 2. Marathon 3. Bitfarms 4. Riot 5. HIVE 6. Hut8 7. MGT Capital