Cang.us — A brilliant turnaround and undervalued

Author: Joy Lou Source: Cycle Trading

Event: Cang.us released three important announcements in November, acquiring Bitmain's 32Eh/s cryptocurrency mining machine at a price of US$256 million; plans to issue US$144 million in shares for the subsequent acquisition of 18Eh/s cryptocurrency mining machines in operation; a total of 393 bitcoins were produced in November.

Comments:

1. Cang.us obtained 32Eh/s cryptocurrency mining machines in operation in the first phase, with a shutdown price of about US$70,000 per coin (including Bitmain's hosting and operating costs). The projects are mainly distributed in five countries including the United States, the Middle East and Africa. The mining machines mainly use Bitmain's flagship S19 mining machines, which currently have a depreciation cycle of about 4 years.

2. The second phase of 18Eh/s will obtain the $144 million required for the operation of cryptocurrency mining machines through a private placement, mainly for investment entities formed by 9 natural persons. The expected completion event is March 2025, and the seller is Golden TechGen (GT).

3. Cangu also signed a supplementary agreement. As an option reward, if Cangu's market value reaches a specific value for 30 consecutive trading days in the next 30 months, the company will further issue $97.1055 million in shares to the investment entities formed by the aforementioned 9 natural persons.

4. Although the price of Bitcoin has risen significantly recently, the company has been in contact with the project for a long time and reached an agreement with the seller of the target project when Bitcoin was about $60,000 to $70,000 per coin. Therefore, the acquisition price is basically a par acquisition.

5. After the completion of this acquisition, Cangu's main business will be transformed from automobile dealer business to self-operated mining business. After that, the company will rely on such businesses to continue to expand outward to diversified business operations including computing power leasing, cloud hosting, etc., and further smooth out the company's profit fluctuations caused by Bitcoin price fluctuations.

Investment advice: After Cangu completes the acquisition of the remaining 18Eh/s project in March 2025, the operating computing power will reach 50Eh/s, becoming the largest mining company listed in the United States so far. Among the current North American mining companies, Marathon Digital (Mara.us) has a self-operated mining farm with a computing power of 46Eh/s, a market value of US$7.9 billion, corresponding to US$170 million/Eh; Cleanspark (Clsk.us) has a self-operated mining farm with a computing power of 32EH/s, a market value of US$3.6 billion, corresponding to US$110 million/Eh. Considering the relatively high shutdown price of the company, we selected $110 million/Eh as the valuation basis, which corresponds to a market value of $3.52 billion before the completion of the second batch of acquisitions in March, and a market value of $5.5 billion after the acquisition. Compared with the company's current market value of only $720 million, it is significantly underestimated, and the room for growth is 3.9 to 6.6 times.

This article was written on December 18, 2024, and the current CANG price is $6.