Bitfury subsidiary to go public in $2 billion SPAC deal

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U.S.-based block reward mining company Cipher Mining Technologies Inc. recently announced that it is combining with special purpose acquisition company Good Works Acquisition Corp. to go public in a deal that will value it at about $2 billion.

Cipher Mining is a newly formed subsidiary of blockchain firm Bitfury Group led by CEO Tyler Page. Bitfury Group manufactures digital currency mining hardware and is one of the leading BTC block reward mining farm operators across the globe.

The parties expect the deal to close in the second quarter. The company intends to trade on the Nasdaq under the ticker “CIFR.”

Securities LLC is acting as the exclusive advisor and lead placement agent to Good Works, while Wells Fargo Securities, LLC is serving as lead financial advisor to Cipher Mining.

Special-purpose acquisition companies, or SPACs, are shell companies that raise funds solely to acquire a private company to take it public. This method allows such targets to sidestep a traditional initial public offering (IPO) to enter public markets. It involves less regulatory scrutiny and more certainty over the market valuation and funds raised.

Cipher Mining expects to raise about $595 million in cash proceeds through the union, including $425 million in a PIPE round led by anchor investors including Morgan Stanley-backed Counterpoint Group and Fidelity Management and Research company. 

Included in the PIPE is a $50 million in-kind investment from Cipher Mining’s parent company, Bitfury, which structured the investment as a credit for future purchases of Cipher’s operating services and equipment. Cipher Mining also expects to receive approximately US $170 million in cash held in Good Works’ trust account from its initial public offering in October 2020. 

The company plans to use the cash influx from the transaction to fund the planned build-out of its blockchain mining facilities. 

Current Cipher Mining stockholders will become the company’s majority shareholders at closing with approximately 70% ownership. The existing shareholders and investors will continue to hold their equity ownership subject to a two-year lock-up period. 

The PIPE investors will own roughly 15%, while Good Works, inclusive of its founder shares, will hold about 7.5%. Cipher employees will own the remaining 7% of the company at closing.

Both boards of directors have unanimously endorsed the proposed transaction. Shareholders of Cipher Mining have also approved, while the transaction remains subject to approval by Good Works’ stockholders, or the waiver of the closing conditions identified in the agreement and plan of merger.

“With this transaction, we will be able to combine the formidable skill sets and technologies developed by Bitfury Group over the past 10 years with what we believe will be a leadership position on the global cost curve, and thereby create a true leader in the Bitcoin mining industry,” Cipher Mining CEO Tyler Page said in a press release.

Once the merger has closed, Cipher hopes to achieve a 745 megawatts mining capacity by the end of 2025. The company says it expects to cross the 445MW milestone by Q2 2022.

See also: TAAL’s Jerry Chan presentation at CoinGeek Live, The Shift from Bitcoin “Miners” to “Transaction Processors”