Yahoo Finance Coatue Invests in Bitcoin Miner Hut 8 as Sector Joins AI Race
(Bloomberg) -- Billionaire Philippe Laffont’s Coatue Management is the latest firm to bet on the artificial intelligence transition in the crypto-mining industry.
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The technology-oriented hedge fund and private equity firm is making a $150 million investment in Hut 8 Corp. through a convertible note, the Miami-based Bitcoin miner said in a statement Monday. Hut 8, one of the largest public miners by computing power, was among the earliest in the industry to get involved in the high-performance computing business that can power generative AI applications.
Hut 8 has 19 sites including 10 Bitcoin mining, hosting, and managed services sites in Alberta, Canada, New York, and Texas, five high performance computing data centers in British Columbia and Ontario, and four power generation assets in Ontario.
The investment comes as crypto miners try to capitalize on their readily available access to large amounts of power that can meet the soaring demand from AI firms. Shares of Core Scientific jumped after the firm secured $3.5 billion in revenue that would be generated from its hosting contracts with AI upstart CoreWeave over the next 12 years. Another utility-turned miner, Terawulf, saw a spike in its stock price as it converts part of its Bitcoin mining infrastructure to power HPC data centers.
Coatue has invested in a variety of AI firms, including OpenAI and CoreWeave, which is a mulling an initial public offering and valued at $19 billion. Access to data centers and power has emerged to be some of the biggest challenges for deep-pocketed AI firms to expand. Laffont was an executive at Julian Robertson’s Tiger Management earlier in his career.
Bitcoin miners, which use power-hungry specialized computers to validate encrypted transactions on the blockchain to earn rewards in the form of the token, have built out energy infrastructure to draw electricity from a grid or secured multi-year power purchase agreements at a fixed price over the last few years when Bitcoin prices skyrocketed. An April software update in Bitcoin, called the “halving”, has slashed mining revenue, spurring the miners to look for new sources of income.
The convertible note will pay 8% interest annually, with an initial term of five years, subject to extension for up to three one-year extension periods at the option of Hut 8. It will be a senior unsecured obligation of the company. The initial conversion price of the note is $16.40 a share of common stock, subject to certain anti-dilution adjustments, which is an approximately 45% premium to the 10-day volume-weighted average price. The transaction is expected to be completed on or prior to July 11, according to the statement.
Shares of Hut 8 have fallen about 8% to around $12.30 this year, giving the company a market capitalization of roughly $1.1 billion. The stock more than tripled last year, after tumbling almost 90% during 2022’s downturn in crypto markets.
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