Bitcoin Depot is North America’s largest cryptocurrency provider. Soon it could be even bigger.
Through a proposed $ 885 million deal to become a public company, Bitcoin Depot aims to conquer the industry. “It’s a move to allow 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 significant M&A activity in the space so far.”
Cryptocurrency companies like Bitcoin Depot offer themselves as an easy way for customers to convert fiat currencies, such as US dollars, into cryptocurrencies in a way similar to regular banking. The services are primarily aimed at people interested in cryptocurrencies but who are unfamiliar with new technologies such as cryptocurrency exchanges and digital wallets. (Some crypto ATMs have also been linked to illicit uses, including money laundering and drug trafficking.)
Of the roughly 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 an investor presentation published by the company. .
Although Mintz did not specify which companies Bitcoin Depot sought to acquire, an influx of money from its public listing could accelerate the ingestion of smaller players and separate the company from its closest competitor, Coin Cloud, which has around 1,500 ATMs in the market. less, according to Coin Radar ATM.
Coin Cloud and CoinFlip did not respond to requests for comment for this story.
Mintz started Bitcoin Depot in 2016. The company operates more than 7,000 kiosks in the United States and last year struck an exclusive deal to install its machines in Circle K convenience stores. According to the investor presentation, the transaction volumes of the company have grown steadily year after year, and the company has posted its highest-ever revenue in the past 12 months, $ 623 million in the second quarter, despite a nearly 60% decrease in Bitcoin’s price this year.
Doubts about evaluation
However, some doubts remain about the company’s decision to go public through a SPAC, a type of deal that has become controversial over the past year as many have not lived up to expectations. A report earlier this year by Renaissance Capital found that of the 199 companies listed on a SPAC last year, only one in 10 had traded above the asking price.
Jae Yang, CEO of Tacen, a decentralized cryptocurrency exchange, said the potential SPAC valuation of nearly a billion dollars seems unusually high, especially when you take into account the decade-old industry and some of the numbers from the company’s presentation to the investors, released last month. Bitcoin Depot posted net income of $ 6 million for the first half of 2022, an increase from the $ 5 million the company took home in the first half of 2021. (Mintz said Fortune that 2021 net profit was impacted by the depreciation of the company’s kiosks.)
Although the company aims for growth, Yang said it reported $ 38 million in adjusted earnings before interest, taxes, depreciation and amortization. for the 12 months ending June 2022 it is “rather negligible given the evaluation”.
However, Gus Garcia, co-CEO of the 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 companies. of comparable financial services. The company says its transaction volume grew at an average annual rate of 164% between 2020 and 2021.
“We think this is underestimated. It’s a bargain. It has an attractive price, ”Garcia said.
Mintz clearly agrees, noting that the global demand is evident.
“There is a dire need for a product like this around the world, in which far more people are excluded from the financial system than in the US and Canada,” he said, without delving into where the company could expand internationally. .
Bitcoin Depot finally plans to raise approximately $ 320 million of SPAC proceeds held in a trust account. But Garcia explained that due to the way SPACs work, investors can redeem their money before the deal is concluded, so the actual amount Bitcoin Depot gets from the transaction could be less than $ 320 million.
‘Here to stay’
Another key part of Bitcoin Depot’s public listing is how it goes public, via a merger with a special purpose acquisition company.
SPACs, or blank check companies, became popular last year as the meme stock frenzy saw an increase in risky betting, but they attracted more criticism as many of the companies that used them saw their stock plummet dramatically. .
These types of public quotes usually take less time to complete than traditional initial public offerings – four months instead of closer to 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,” said Kumar. Fortune.
But in March, the Securities and Exchange Commission proposed new rules that would place restrictions on the timing during which a SPAC can enter into a deal or otherwise be subject to higher compliance requirements. This could result in the liquidation of nearly half of all SPACs still in the process of closing a deal, according to a report from Institutional Investor.
The ATM provider is looking to close the deal in the first quarter of 2023, which, if successful, would give investors looking for indirect exposure to cryptocurrencies another option, similar to buying Coinbase shares. o Microstrategy.
“Bitcoin and the growth of the digital asset market are here to stay,” Kumar said. “Regardless of how a company goes public, having yet another crypto company ticker shows the maturity of the industry and how far it has come.”
Should Bitcoin Depot’s SPAC deal go through, it also offers Mintz, who has 100% control of the company, a way to cash in on some shares. She said Fortune intends to remain as CEO.