LM Funding America, Inc. Enters into Agreement to Make Pivotal Acquisition

Rhea-AI Summary

LM Funding America (NASDAQ: LMFA) has signed an asset purchase agreement to acquire a 15 MW mining site in Oklahoma from Tech Infrastructure JV I for $7.3 million. The company currently operates 10 MW of Bitcoin mining machines at this site. The acquisition includes air-cooled GIGA containers, transformers, and related infrastructure. The payment structure involves $1.1 million in cash, $3.7 million in loan credits, and $2.5 million held in escrow. By January 2025, LM Funding plans to deploy approximately 800 S21 and XP Bitmain machines and 640 S19J Pros after vacating the current third-party miner from 5 MW of space.

Positive

• Vertical integration of Bitcoin mining operations
• Acquisition of 15 MW mining site infrastructure
• Cost-effective facility transition from Core
• Leveraging existing $3.7M in loans as part of purchase price
• Planned deployment of new mining machines

Negative

• Significant capital expenditure of $7.3M for acquisition
• Dependency on third-party miner exit for full site utilization
• Additional loan exposure of $0.7M to JV

Insights

Financial Analyst

This $7.3 million acquisition marks a significant strategic shift for LMFA, transforming from a hosting client to infrastructure owner. The deal structure is notably favorable, with only $1.1 million immediate cash outlay and $3.7 million loan conversion. The 15 MW facility acquisition at roughly $486,666 per MW represents good value compared to industry standards of $500,000-750,000 per MW for new builds.

The vertical integration should improve operational margins by eliminating third-party hosting fees. With planned deployment of 800 S21/XP and 640 S19J Pro miners, LMFA could significantly boost its mining capacity. However, investors should note the $2.5 million escrow contingency and potential execution risks in transitioning third-party miners by January 2025.

Cryptocurrency Mining Expert

The strategic value of this acquisition extends beyond the infrastructure. By controlling its own facility, LMFA gains important operational flexibility and cost optimization potential. The mix of S21, XP and S19J Pro miners represents a balanced approach to efficiency and reliability. The Oklahoma location typically offers competitive power rates, which is important for mining profitability.

The transition from Core to self-owned facilities should enhance operational control and reduce dependencies on third-party hosts. The 15 MW capacity provides room for future expansion, though investors should monitor execution of the third-party miner transition and potential power contract terms.

TAMPA, Fla., Nov. 14, 2024 (GLOBE NEWSWIRE) -- LM Funding America, Inc. (NASDAQ: LMFA) (“LM Funding” or the “Company”), a cryptocurrency mining and technology-based specialty finance company, is pleased to announce the signing of an asset purchase agreement to acquire the business assets of a 15 MW mining site in Oklahoma from Tech Infrastructure JV I LLC (“JV”), a joint venture majority-owned by Arthur Inc., for $7.3 million. The Company currently operates 10 MW of machines actively mining Bitcoin (BTC) at this site.

Bruce Rodgers, Chief Executive Officer of LM Funding, stated, “This acquisition is a pivotal first step in our strategic initiative to become a vertically integrated Bitcoin mining operation. The 15 MW hosting site enables us to transition our miners from Core to a cost-effective facility. As part of our expansion strategy, we intend to continue identifying additional hosting sites to drive further growth for our business. The Company expects to close this acquisition in December 2024.”

The acquisition includes most of the business assets of the JV, which includes air-cooled GIGA containers, transformers, and related infrastructure. Upon closing, LM Funding will pay approximately $1.1 million and apply previously extended loans to the JV, totaling approximately $3.7 million in accrued principal and interest, as a credit towards the purchase price. The remaining $2.5 million will be held in escrow to ensure the timely completion of this acquisition, including the exit of a third-party miner currently hosted by the JV. At the signing of the asset purchase agreement, the Company lent an additional $0.7 million to JV, which resulted in aggregate loans totaling $3.7 million by the Company to the JV. The facility and assets are being acquired by LM Funding for its own internal hosting needs and not for the purpose hosting third-party mining machines.

Arthur Inc. emphasized the strategic importance of the transaction, noting that the proceeds will be reinvested directly into its subsidiary growth strategy, focusing on the development of new mining sites and the expansion of its operational capacity. “This transaction represents a pivotal step in our long-term vision. By reinvesting the proceeds, we are positioning to capitalize on emerging opportunities in the mining sector, driving innovation and scaling our operations to meet growing demand.” said Rudá Pellini, President of Arthur Inc.

Not later than January 2025, LM Funding plans to vacate the third-party miner currently hosted at the site from 5 MW of Arthur Mining’s current hosting space, paving the way for the deployment of approximately 800 of LM Funding’s S21 and XP Bitmain machines and 640 S19J Pros. The escrow is expected to be paid not later than January 2025 once all third-party miners are removed from the site and certain other closing conditions are met.

This strategic move underscores LM Funding's commitment to optimizing its operations and solidifying its leadership in the evolving cryptocurrency mining sector.

About LM Funding America

LM Funding America, Inc. (Nasdaq: LMFA), together with its subsidiaries, is a cryptocurrency mining business that commenced Bitcoin mining operations in September 2022. The Company also operates a technology-based specialty finance company that provides funding to nonprofit community associations (Associations) primarily located in the state of Florida, as well as in the states of Washington, Colorado, and Illinois, by funding a certain portion of the Associations' rights to delinquent accounts that are selected by the Associations arising from unpaid Association assessments.

Forward-Looking Statements
This press release may contain forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. Words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” and “project” and other similar words and expressions are intended to signify forward-looking statements. Forward-looking statements are not guaranties of future results and conditions but rather are subject to various risks and uncertainties. Some of these risks and uncertainties are identified in the company's most recent Annual Report on Form 10-K and its other filings with the SEC, which are available at www.sec.gov. These risks and uncertainties include, without limitation the risk that the Company may not be able to successfully complete the above-described acquisition transaction, the risk that the expected benefits from the acquisition to the Company will not be realized or will not be realized within the expected time periods, the risks of operating in the cryptocurrency mining business, uncertainty in the cryptocurrency mining business in general, problems with hosting vendors in the mining business, the capacity of our Bitcoin mining machines and our related ability to purchase power at reasonable prices, the ability to finance our planned cryptocurrency mining operations, our ability to acquire new accounts in our specialty finance business at appropriate prices, the potential need for additional capital in the future, changes in governmental regulations that affect our ability to collect sufficient amounts on defaulted consumer receivables, changes in the credit or capital markets, changes in interest rates, negative press regarding the debt collection industry, and the risk of pandemics such as the COVID-10 pandemic. The occurrence of any of these risks and uncertainties could have a material adverse effect on our business, financial condition, and results of operations.

Contact :
Crescendo Communications, LLC
Tel : (212) 671-1021
Email: LMFA@crescendo-ir.com

FAQ

What is the value of LM Funding's Oklahoma mining site acquisition?

LM Funding (LMFA) is acquiring the 15 MW mining site in Oklahoma for $7.3 million.

When will LM Funding complete the Oklahoma mining site acquisition?

LM Funding expects to close the acquisition in December 2024.

How many Bitcoin mining machines will LM Funding deploy at the Oklahoma site?

LM Funding plans to deploy approximately 800 S21 and XP Bitmain machines and 640 S19J Pros by January 2025.

How is LM Funding structuring the payment for the Oklahoma mining site?

The payment structure includes $1.1 million in cash, $3.7 million in loan credits, and $2.5 million held in escrow.