Meten EdtechX, a China-based and Nasdaq-listed English language coaching agency, has ventured into the Bitcoin mining house as China cracks down on the personal tutoring enterprise.
Meten, which went public in March 2020 by way of a SPAC deal, first mentioned in September that it plans to get into cryptocurrency mining to broaden its enterprise traces and shortly raised practically $60 million in a brand new spherical of fairness issuance.
In its prospectus for the September increase, Meten indicated that it was “considering” shopping for each mining machines and NFT belongings with plans to construct its personal mining farm. “We’re presently looking for low-cost pure fuel, oil mines, and different appropriate websites in Canada,” Meten mentioned on the time.
Now it seems the agency has made its first step to check the waters final week by shopping for 1,500 items of recent era Bitcoin mining machines for a value of $12 million from AGM Holdings, a brand new Bitcoin ASIC mining chip manufacturer that has just lately introduced a number of bulk pre-orders.
Meten’s transition transfer comes about two months after China formally banned for-profit tutoring – each on-line and offline – in topics on Chinese language college curriculum, which incorporates the English language.
It’s the newest instance of how a small-to-mid dimension public firm, with an preliminary market capitalization of practically $3 billion, is attempting to make use of Bitcoin mining to salvage its declining enterprise that has additionally been – maybe unexpectedly – worsened by China’s regulatory surroundings.
98% off
Meten was based in 2006 in Shenzhen and as of December final yr owned over 100 self-operated studying facilities throughout some 30 Chinese language cities.
It supplies on-line and offline English coaching classes for each adults and juniors. For the primary half of this yr, Meten incurred a web lack of $26 million on a income of $67 million. About 20% of the income got here from on-line and offline tutoring for juniors.
When Meten was listed in March 2020, its inventory worth went as much as as a lot as $27 and had since then maintained round $15 till August that yr when it disclosed a web lack of $30 million for the primary half of 2020.
Its inventory efficiency stored declining since then and dropped under $1 in Could this yr, which was worsened by a Reuters unique report that China was poised to ban Ok-12 personal tutoring companies on college curriculum topics – significantly math and English – in two months.
China’s aggressive schooling system has bolstered the expansion of for-profit tutoring companies over the previous a long time however the authorities is now aiming to scale back the academic strain on each kids and fogeys in its bid to encourage the nation’s birthrate.
The official crackdown discover was launched in July and a wider market sell-off on the time induced Meten’s inventory worth to succeed in as little as $0.28. However it has since then bounced again to $0.55, though remains to be 98% off its itemizing excessive.
Meten mentioned in its 2021 interim earnings report that the July ban could “materially and adversely have an effect on” its enterprise operations, monetary situation and prospects.
Lack of expertise
Over the previous 4 years, there have been each success and failure tales of struggling Chinese language public firms tapping into Bitcoin mining to bolster its authentic enterprise traces.
As an illustration, BIT Mining, beforehand often called the sports activities lottery agency 500.com, started its Bitcoin mining pivot in early 2019 and has grown right into a critical operation. It has averted a lot of the limelight till early this yr when it formally introduced the pivot and the acquisition over mining pool BTC.com.
Others, like China-listed cellular app developer Wholeasy, weren’t so fortunate. Its $80 million investment in Bitcoin mining tools in 2018 and subsequent infrastructure build-out within the U.S. went improper finally and led to virtually negligible returns.
For its half, Meten admitted that it has no prior expertise and has “no assurance” that its Bitcoin mining effort will succeed.
“With respect to our plan to develop our blockchain and cryptocurrency enterprise, we could not be capable to purchase cryptocurrency mining machines at an affordable value, or in any respect,” the agency mentioned within the September prospectus. “As a result of our restricted expertise with blockchain and cryptocurrency actions, we additionally face challenges and uncertainties regarding the opportunity of success of our new enterprise.”
It seems Meten’s mining tools buy from AGM was already at a better value than the market charge.
In an announcement on Wednesday, AGM mentioned it offered 10,000 items of its new era of Bitcoin miners to a different U.S-listed Chinese language mining agency CCNC for $65 million, which is about 18% cheaper per unit than what Meten paid for.
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