Iris Energy Limited (NASDAQ: IREN), an Australian company that has been mining bitcoin since 2019, is the latest of its kind to go public.
The company made its Wall Street debut on Wednesday, Nov. 17.
Iris priced its initial public offering at $28 a share Tuesday evening, raising at least $231.5 billion at a valuation shy of $1.6 billion.
Iris priced the IPO above the range it had provided in its filing with the U.S. Securities and Exchange Commission (SEC). In its IPO paperwork, the company had planned to offer 8.27 million shares priced at $25 to $27 each.
In the end, it sold 8.27 million shares at $28 each, with underwriters holding a 30-day option to buy an additional 1.2 million shares.
J.P. Morgan, Citigroup, and Canaccord Genuity are lead underwriters on the deal, with Macquarie Capital, Cowen, CLSA, and Cantor Fitzgerald acting as book-runners.
The stock began trading on the Nasdaq Global Select under the ticker symbol “IREN.”
How Iris performed on first trading day
The first trade for the stock was $28 a few minutes after the opening bell. But the stock quickly dropped by 14% to change hands at $24 apiece shortly after noon Eastern Time.
Iris later fell as much as 22% before recouping some of the losses to end its first trading down 12.7% to $24.45.
As of this writing, the stock is currently priced at $23.40 a share.
Iris Energy company profile
Iris Energy was founded in 2018 by two brothers Daniel Roberts and Will Roberts, who worked at Australian investment bank Macquarie Group Ltd. The brothers also previously held other digital and investment roles.
Iris relies on renewable energy to mine bitcoin and has its own data center infrastructure.
The company has a data center project in the Canadian Pacific coast province of British Columbia.
This center has approximately 30 megawatts of capacity. It is linked to the British Columbia Hydro and Power Authority electricity network, which sources 98% of its electricity from renewable or green sources.
Iris finances and stock ownership
Daniel and Will, 37 and 32, respectively, will each own a 10% stake in Iris. The brothers have attracted several high-profile pre-IPO backers including Regal Funds Management, Wilson Asset Management, Platinum Asset Management, and billionaire investor Alex Waislitz.
Before listing on the Nasdaq, Iris had raised more than $175 million from investors alone this year.
In the three months ended Sept. 30, Iris had revenue of $10.4 million compared with revenue of $800,000 during the same period in 2020.
According to its prospectus, the company posted an after-tax loss of $490 million for the September quarter. However, Iris claimed earnings before interest, tax, depreciation, and amortization (EBITDA) of $6.02 million.
For the full fiscal year 2021 (which ended June 30), Iris posted revenue of $8.31 million, up 241% from $2.43 million.
But it reported a net loss of $59 million.
Proceeds of the IPO will be used to increase capitalization, financial flexibility, create a public market for the company’s ordinary shares, and enable access to the public market for the company and its shareholders, along with the catchall “general corporate purposes,” according to the prospectus.
What does Iris do with its bitcoins?
In its IPO roadshow, Daniel Roberts pointed out that the company does not speculate on or hold cryptocurrencies. He also added that Iris has no interest in crypto activities such as non-fungible tokens or decentralized finance (DeFi).
Once it has mined bitcoins, the company converts all of them into cash. After expenses, the rest of the proceeds are profit.
Bitcoin mining landscape
Bitcoin has grown massively since its creation in 2008 and has attracted the attention of retail traders, hedge funds, and famous investors such as Elon Musk and Cathie Wood.
However, the cryptocurrency now uses up more electricity a year than the whole of the United Arab Emirates and Argentina, according to estimates recently provided by Cambridge University.
Why? Because the creation of the cryptocurrency, in a process known as mining, is achieved by powerful computer setups that work day and night to solve and decode complex mathematical problems. These computers demand more and more energy to mine the cryptocurrency.
Cambridge’s analysis shows that bitcoin’s power consumption of 121.05 terawatt-hours beats that of the United Arab Emirates at 113.2 TWh and Argentina at 121 TWh. To mine a single bitcoin, the computers have to be fed with about 150,000 kwh, which is enough power 160 average American homes for a month.
Despite being a valuable asset, it is clear that bitcoin is an environmental disaster. The amount of carbon released into the atmosphere by bitcoin miners depends wholly on the energy source used.
As a result, some miners like Iris Energy have brought on the idea of using of renewable sources to power bitcoin mining. Iris executives believe taking this unique approach will give the company an edge in a very competitive industry.
Iris plans to use the about $215 million raised from its IPO to buy new bitcoin mining machines and data centers where it will install the machines.
The bitcoin mining scene has exploded in the U.S. over the last year after China purge all its cryptocurrency miners.
Cryptocurrency miners across the U.S. are now looking for ways to compete, typically by seeking the cleanest and most affordable source of power available.
Iris Energy joins a list of other bitcoin miners that have recently hit the public markets.
Stronghold Digital Mining Inc. (NASDAQ: SDIG), a Pennsylvania-based company that mines bitcoin from waste coal, made its market debut on Oct. 19.
Iris and Stronghold join other established bitcoin miners such as Hive Blockchain Technologies Ltd. (NASDAQ: HIVE), Marathon Digital Holdings Inc. (NASDAQ: MARA), and Riot Blockchain Inc. (NASDAQ: RIOT).
Iris says it can remain profitable even when the price of bitcoin is slumping. The company hopes that its low operating costs will enable it to continue mining bitcoin at a profit, while competitors with higher costs are forced to back down or mine the cryptocurrency at a loss.
If bitcoin price goes up, the company will have the capacity in place to make the most out of the cryptocurrency.
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