Bitcoin Depot Chases $885M SPAC to ‘Consolidate the Industry’ of Crypto ATMs

Through a proposed $885 million deal to become a public company, Bitcoin Depot aims to take over the sector. “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 has been no significant M&A activity in the area so far.”

Crypto ATM companies such as Bitcoin Depot present themselves as an easy way for customers to convert fiat currencies, such as US dollars, into cryptocurrencies in a manner similar to regular banking. The services are mainly aimed at people who are interested in crypto but are not familiar with new technologies such as crypto exchanges and digital wallets. (Some crypto ATMs have also been linked to illegal uses, including money laundering and drug trafficking.)

Of the roughly 30,000 crypto ATMs in the US, the three largest companies, Bitcoin Depot, Coin Cloud and CoinFlip, control more than 40% of the market, with Bitcoin Depot claiming 20% ​​of the total on its own, according to one investor. presentation published by the company.

Although Mintz did not specify which companies Bitcoin Depot was seeking to buy, an influx of cash from the public listing could accelerate the absorption of smaller players and differentiate the company from its closest competitor, Coin Cloud, which has about 1,500 fewer ATMs, according to Coin Minibank Radar.

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 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 have grown steadily year over year, and the company recorded its highest-ever revenue in the previous 12 months, $623 million from the second quarter, despite a nearly 60% decline in the price of Bitcoin this year.

Doubts about valuation

Still, some doubts remain about the company’s decision to go public via a SPAC, a type of deal that has become controversial in the past year as many fell short of expectations. A report earlier this year by Renaissance Capital noted that among the 199 companies that went public via a SPAC last year, only about one in 10 had traded above their asking price.

Jae Yang, CEO of Tacen, a decentralized crypto exchange, said the potential SPAC value of nearly $1 billion seems unusually high, especially considering the decade-old industry and some of the numbers from the company’s investor presentation, published recently. month. Bitcoin Depot posted $6 million in net income for the first half of 2022, up from the $5 million the company took home in the first half of 2021. (Mintz told Fortune that the net income in 2021 was affected by the company’s kiosks declining.)

Although the company points to growth, Yang said it reported $38 million in adjusted earnings 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 the SPAC that Bitcoin Depot intends to merge with, 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 claims that transaction volume grew at an average annual rate of 164% between 2020 and 2021.

– We think this is underpriced. It’s a bargain. It is attractively priced, says Garcia.

Mintz clearly agrees, and emphasizes that the global demand is clear.

“There’s a huge need for a product like this around the world, where many more people are left out of the financial system than the US and Canada,” he said, without elaborating on where the company might next expand internationally.

Bitcoin Depot expects to eventually reap about $320 million in SPAC proceeds held in a trust account. But Garcia explained that because of the way SPACs work, investors can cash out their money before the deal closes, so the actual amount Bitcoin Depot gets from the transaction could be lower than $320 million.

‘Here to Stay’

Another important part of Bitcoin Depot’s IPO is how it goes public – via a merger with a special purpose acquisition company.

SPACs, or blank check companies, grew in popularity last year as the meme stock frenzy saw a rise in risky bets, but they have come under more criticism as many of the companies that used them have seen their shares plummet.

These types of public listings typically take less time to complete compared to traditional IPOs — four months instead of closer to 12 months — said Varun Kumar, co-founder and CEO of Hashflow, a decentralized trading platform.

“Speed ​​and less 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 place limits on the timeline in which a SPAC can enter into an agreement or otherwise be subject to increased compliance requirements. This could leave nearly half of all SPACs still in the process of closing a deal to liquidate, according to a report by 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 crypto another option, similar to buying shares in 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, another ticker for crypto companies shows the maturity of the industry and how far it has come.”

Should Bitcoin Depot’s SPAC deal go through, it also gives Mintz, who has 100% control of the company, a way to cash out some shares. He told Fortune he intends to continue as CEO.