Meten EdtechX, a China-based English course company listed on Nasdaq, has ventured into the Bitcoin mining space while China cracks down on the private tuition business.
Meten, which went public in March 2020 through a SPAC deal, first said in September that it plans to get into cryptocurrency mining to expand its businesses and soon raised nearly 60 million in a new round of stock issuance US dollar a.
In its prospectus for the September increase, Meten stated that it is “considering” buying both mining equipment and NFT equipment in order to build its own mining farm. “We are currently looking for cheap natural gas, oil mines and other suitable locations in Canada,” Meten said at the time.
Now, it appears the company took its first step last week to test the water by purchasing 1,500 units of new generation bitcoin mining machines for a price of $ 12 million from AGM Holdings, one new Bitcoin ASIC mining chip maker who recently announced several bulk premiering orders.
Meten’s transition comes about two months after China officially banned for-profit tutoring – both online and offline – in subjects on the Chinese curriculum, which include the English language.
It’s the latest example of a small to medium-sized public company with an initial market cap of nearly $ 3 billion trying to use bitcoin mining to save its declining business, which has also – perhaps unexpectedly – been made worse by China’s regulators Surroundings.
Meten was founded in Shenzhen in 2006 and in December last year owned over 100 self-operated learning centers in around 30 Chinese cities.
It offers online and offline English classes for adults and teenagers. For the first half of this year, Meten posted a net loss of $ 26 million on sales of $ 67 million. About 20% of the income comes from online and offline tutoring for juniors.
When Meten went public in March 2020, the share price rose as high as $ 27 and has been around $ 15 since then until August of that year when the company posted a net loss of $ 30 million for the first half of 2020 expelled.
Stock performance has continued to decline since then, falling below $ 1 this May, compounded by an exclusive report from Reuters that China was ready to open private K-12 tutoring companies for school subjects – math and English in particular – in two months to disallow.
China’s competitive education system has fueled the growth of for-profit tutoring companies over the past few decades, but the government is now aiming to ease educational pressures on children and parents in order to boost the country’s birth rate.
The official crackdown notice was released in July, and a wider market sell-off at the time caused Meten’s share price to drop as low as $ 0.28. However, it has since rebounded to $ 0.55, although it is still 98% off its market high.
Meten said in its 2021 interim results report that the July ban could “materially and adversely” impact its business, financial condition and prospects.
Lack of experience
Over the past four years, there have been both success and failure stories of struggling Chinese public companies tapping into Bitcoin mining to strengthen their original businesses.
For example, BIT Mining, formerly known as the sports lottery company 500.com, launched its Bitcoin mining pivot in early 2019 and has grown into a serious business. It avoided much of the limelight until earlier this year when it officially announced the pivot and acquisition of the mining pool BTC.com.
Others, like China-listed mobile app developer Wholeasy, have not been so lucky. His $ 80 million investment in Bitcoin mining equipment in 2018, and subsequent infrastructure build-out in the US, eventually went wrong and resulted in almost negligible returns.
For his part, Meten admitted that it has no prior knowledge and “no certainty” that its Bitcoin mining efforts will be successful.
“In relation to our plan to develop our blockchain and cryptocurrency businesses, we may not be able to purchase cryptocurrency mining machines at reasonable cost or not at all,” the company said in the September prospectus. “Due to our limited experience with blockchain and cryptocurrency activities, we also face challenges and uncertainties regarding the chances of success of our new business.”
It appears that Meten’s purchase of mining equipment from AGM was already at a cost higher than the market price.
In an announcement on Wednesday, AGM said it sold 10,000 units of its new generation of Bitcoin miners to another U.S.-listed Chinese mining company CCNC for $ 65 million, which is about 18% cheaper than what Meten is paying for Has.
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