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Bitcoin Depot is the largest crypto ATM provider in North America. It could soon be even bigger.

Through a proposed $885 million deal to go public, Bitcoin Depot aims to take over the industry. “This is a move that allows us to consolidate the industry and be one of the first companies to do so,” said Bitcoin Depot CEO Brandon Mintz. Fortune. “There hasn’t been any sort of significant merger and acquisition activity in the space so far.”

Crypto ATM companies like Bitcoin Depot market themselves as an easy way for customers to convert fiat currencies, like the US dollar, into cryptocurrencies in a way similar to regular banking. The services are primarily aimed at people who are interested in crypto but unfamiliar with new technologies such as crypto exchanges and digital wallets. (Some crypto ATMs have also been linked to illicit uses, including money laundering and drug trafficking.)

Of the approximately 30,000 crypto ATMs in the United States, the three largest companies, Bitcoin Depot, Coin Cloud and CoinFlip control more than 40% of the market, with Bitcoin Depot alone claiming 20% ​​of the total, according to a investor presentation published by the company.

Although Mintz did not specify which companies Bitcoin Depot was looking to acquire, an influx of money from its public listing could hasten the engulfment of smaller players and separate the company from its closest competitor, Coin Cloud, which has approximately 1,500 fewer ATMs, according to Coin ATM Radar.

Coin Cloud and CoinFlip did not respond to requests for comment for this story.

Mintz launched Bitcoin Depot in 2016. The company operates more than 7,000 kiosks in the United States and last year it entered into an exclusive agreement to install its machines in Circle K convenience stores. According to the investor presentation, the company’s transaction volumes increased steadily year over year, and the company recorded its highest revenue ever in the previous 12 months, $623 million in the second quarter, despite a drop of almost 60% in the price of Bitcoin this year.

Doubts about valuation

Nevertheless, doubts remain as to the company’s decision to make public via a SPACa type of deal that became controversial last year because many did not meet expectations. A report earlier this year of the capital of the Renaissance noted that of the 199 companies that went public via a SPAC last year, only about one in 10 was trading above its asking price.

Jae Yang, CEO of Tacen, a decentralized crypto exchange, said that SPAC’s potential valuation of nearly $1 billion seems unusually high, especially considering the decade-old industry and some figures from the company’s recently published investor presentation. month. Bitcoin Depot reported net income of $6 million for the first half of 2022, an increase from the $5 million the company earned in the first half of 2021. (Mintz said Fortune that 2021 net income was impacted by the impairment of the company’s kiosks.)

Even though the company is showing growth, Yang said adjusted earnings of $38 million before interest, taxes, depreciation and amortization for the 12 months ending June 2022 is “pretty paltry given the valuation”.

Still, Gus Garcia, co-CEO of SPAC with which Bitcoin Depot intends to merge, GSR II Meteora Acquisition Corp., said that based on other metrics, including margins and revenue growth, the ATM provider is better positioned than comparable financial services companies. . The company says its transaction volume grew at an average annual rate of 164% between 2020 and 2021.

“We think it’s undervalued. It’s a bargain. It’s attractively priced,” Garcia said.

Mintz clearly agrees, pointing out that global demand is apparent.

“There is an urgent need for a product like this around the world, where many more people are excluded from the financial system than in the United States and Canada,” he said, without elaborating. where the company could then expand internationally.

Bitcoin Depot ultimately expects to raise approximately $320 million in SPAC proceeds held in a trust account. But Garcia explained that because of how SPACs work, investors can redeem their money before the deal closes, so the actual amount Bitcoin Depot makes from the transaction could be less than $320 million.

‘Here to stay’

Another key part of Bitcoin Depot going public is how it goes public, via a merger with a special purpose acquisition company.

SPACs, or blank check companies, rose to popularity last year as a meme-stocking frenzy led to an increase in risky bets, but they have come under increasing criticism as many companies have used. have seen their shares drop drastically.

These types of public listings typically take less time than traditional initial public offerings — four months instead of nearly 12 months — said Varun Kumar, co-founder and CEO of Hashflow, a decentralized trading platform.

“The speed and lower regulatory obligations and requirements can make SPACs a more attractive vehicle for raising capital,” Kumar said. Fortune.

But in March, the Securities and Exchange Commission proposed new rules that would restrict how long a SPAC can enter into a deal or be subject to increased compliance requirements. This could mean almost half of all SPACs are still in the process of making a deal liquidateaccording to a report by Institutional Investor.

The ATM provider is looking to complete the deal in the first quarter of 2023, which, if successful, would give investors looking for indirect exposure to crypto another option, similar to buying shares of Coinbase or Microstrategy.

“Bitcoin and the growth of the digital asset market are here to stay,” Kumar said. “Regardless of how a company goes public, having another crypto company ticker shows the maturity of the industry and how far it has come.”

If Bitcoin Depot’s SPAC deal goes through, it also gives Mintz, who 100% controls the company, a way to cash out some shares. He said Fortune he intends to stay on as CEO.

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