CEO of Riot Blockchain: Company is one of Mining's best-positioned acquirers” in the space

CEO of Riot Blockchain: Company is one of Mining's best-positioned acquirers” in the space

Riot Blockchain is one of the “best-positioned buyers” in the mining space, the company’s CEO said – a segment that many say is primed for consolidation during the crypto winter.

But Riot's CEO Jason Les said the company isn't necessarily looking for size in potential deals as it's busy pursuing its own expansion.

The Colorado-based company had 55,728 active miners as of September 30, with a hash rate capacity of 5.6 exahashes per second (EH/s). 12.5 EH/s in the first quarter of 2023.

“It’s a sprint,” Les said. “It’s an all-hands-on-deck effort to build this infrastructure and deploy these miners… to increase that hash rate as quickly as possible.”

Mining M&A coming?

Riot Blockchain is one of the largest publicly traded miners in a space that has grown rapidly but is now dealing with a downturn that has cut off access to capital for many.

At the end of the second quarter, the company had $270 million in cash on its balance sheet. Although Les declined to comment on the company's current cash balances - the company will report its third quarter results next month - Riot Blockchain held 6,775 Bitcoins at the end of September.

“If we have the opportunity to acquire a hashrate at a very attractive price, things will be interesting,” he told Blockworks.

"Strategically it's hard to see anything really adding. It just makes a big thing bigger, so at what price can we get that and what will that add to our financial results," he added.

Other executives from larger mining companies have expressed concerns about acquiring in the current market environment. Marathon Digital CEO Fred Thiel told Blockworks last week that in many cases it is wiser for large Bitcoin miners to build rather than buy.

Riot Blockchain is no stranger to acquisitions. In May 2021, the company completed the acquisition of Whinstone's 100-acre Bitcoin mining site in Rockdale, Texas. Then in December it announced the purchase of ESS Metron, a designer and manufacturer of electrical equipment, which the company said would help it maintain critical infrastructure to deploy miners more quickly.

Les pointed to the latter deal as "a major leap" in the company's efforts to vertically integrate.

“There is also always the potential for these types of acquisitions – a company that supports the vertical integration strategy that may not be specific to Bitcoin mining itself,” he added.

As for the broader space, Les said he expects mergers and acquisitions among smaller miners that grew too quickly during last year's bull market. Other mining companies, he added, will go bankrupt or try to go private to reduce the complexity of their business.

“Consolidation for the sake of consolidation makes no sense,” said the CEO of Riot Blockchain. "There has to be a synergistic advantage that comes to the table for the two companies, so I'm not sure how these pieces come together on the chessboard."

A focus on building in Texas

Although Thiel said Marathon Digital is exploring potential options for global expansion as mining in Texas becomes more crowded, Les said Riot Blockchain will continue to focus on expansion in the state.

The company's relationships in Texas helped it secure a site that would house 1 gigawatt of capacity in Navarro County, about an hour outside of Dallas, Les said - a deal announced in April.

“Not deep in West Texas ... but in an area that has a community we could work with and is only two hours from our existing facility in Rockdale,” Les said. “We have a lot of advantages when we can keep things relatively local, move people and resources between locations and leverage relationships.”

The deregulated electricity market is also very attractive in Texas, the executive added. The Electric Reliability Council of Texas (ERCOT) operates more than 1,000 electric generating units, accounting for approximately 90% of the state's electricity load.

Les said closer relationships between Bitcoin miners and energy networks will be crucial to the space, as mining can monetize energy that would otherwise be wasted.

Riot participated in ERCOT's Four Coincident Peak (4CP) program from June to September, which allows companies to reduce energy consumption in exchange for savings on electricity bills.

“Bitcoin mining has a real opportunity to become part of our energy grid everywhere,” said Les. “This will improve the energy grid and demonstrate the strength, resilience and added value of Bitcoin mining.”

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The CEO of Post Riot Blockchain: Company is one of Mining Space's 'Best-positioned Acquirers' is not financial advice.