Gaming firm The9 stock soars on news its entering block reward mining

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China-based and Nasdaq-listed company The9 Ltd (NASDAQ: NCTY) saw its share price rise over 70% this week after announcing that it would enter the block reward mining sector. 

To enable this transition, the company signed a binding investment term sheet with several former board directors of ASIC hardware manufacturer Canaan, including Sun Qifeng, Zhang Li, and Kong Jianping, a former Co-Chairman of Canaan Inc. 

The outline of the term sheet details that The9 will issue 8,108,100 Class A ordinary shares and 207,891,900 warrants to the former Canaan directors. They will then help the firm develop its block reward mining businesses, including sourcing blockchain mining hardware.

“We will assist The9 to purchase cryptocurrencies mining machines including but not limited to AvalonMiners, AntMiners, WhatsMiners, and Ipollo miners, and build up a professional team to focus on cryptocurrencies business,” Kong said in the SEC filing.

If pre-agreed conditions are realized, and investors exercise all warrants, The9 expects to have raised $34 million in either its preferred choice of USD or digital currencies (including BTC). The9 will set up a wholly owned subsidiary, named NBTC Limited, to spearhead the new block reward mining business.

Jun Zhu, chairman and CEO of The9, conveyed the firm’s intentions to become one of the world’s largest block reward mining companies in terms of hash rate. They plan to build a server fleet of hardware devices that contributes 8% to 10% of the global hash rate of BTC, 10% of the worldwide hash rate of Ethereum, and 10% of the worldwide hash rate of Grin. Zhu hopes the move will also speed up their other digital currency-related businesses.

“The9 has begun to deploy its blockchain and cryptocurrencies business strategy. This time, we are cooperating with investors, including Mr. Jianping Kong. They have rich experience and resources in the field of cryptocurrencies mining machine manufacturing and cryptocurrencies mining operation and should be able to assist The9 to launch our cryptocurrencies mining operation,” Zhu said. 

On Thursday, The9 shares were at $24, up 61.18 percent from the previous close of $14.89 on a volume of 13,779,720. The rise in share price could not have come at a better time.

The pivot comes less than 60 days after The9 received a market capitalization deficiency notice from NASDAQ warning of delisting risks. The firm was not meeting the listing requirement in Rule 5550(b)(2) of maintaining a minimum market capitalization of $35 million and was given until May 11, 2021, to regain compliance with Nasdaq’s minimum MVLS requirement. 

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