Cypherpunk Technologies acquired roughly 18% of Zcash’s mining power in a $33.33 million equity deal that could dilute shareholders.
On Aug. 18, the public company revealed that it bought 4,902 mining machines from Moria Mining, an affiliate of Winklevoss Treasury Investments (WTI). The fleet generates about 4.2 GSol/s across three US sites, making Cypherpunk the operator of the world’s largest active Zcash mining fleet.
The acquisition also turns Cypherpunk’s Zcash strategy from one focused mainly on holding the token into one that can produce it.
Cypherpunk held 323,394.38 ZEC as of Aug. 11, roughly 2% of the digital asset’s circulating supply, and has set a target of owning 5%. The company said mining could help it reach that goal by producing ZEC at costs below prevailing spot prices.
About 1,440 ZEC are distributed to miners each day. Cypherpunk said the output from its new fleet could fund additional ZEC purchases, future growth and investments in privacy-focused technologies.
“Up until now, investors have had limited options for Zcash mining exposure. With the acquisition of this mining fleet, Cypherpunk changes that,” Cameron and Tyler Winklevoss said in the announcement.
The company also appointed Kevin Zhang as head of mining. Zhang, who previously helped build major North American mining operations for Foundry, said current Zcash mining economics generate stronger returns than Bitcoin mining and artificial-intelligence colocation.
The Zcash expansion carries a large equity cost
Cypherpunk did not pay cash for the $33.33 million mining fleet, tying the cost of its Zcash expansion instead to a potentially substantial increase in its share count.
WTI received a pre-funded warrant covering 43.29 million shares with an exercise price of $0.001. Cypherpunk valued its stock at $0.77 per share for the transaction.
Against the roughly 107.8 million shares outstanding before the deal, full issuance would expand the share count to about 151.1 million. This means the warrant shares would represent roughly 28.7% of that enlarged total.
However, most of it cannot yet be issued.
The agreement initially permits the issuance of 5.37 million shares. Cypherpunk has agreed to seek shareholder approval at its next annual meeting for the remaining shares and to continue seeking approval at later meetings if the proposal fails.
The warrant also prevents WTI from exercising shares that would push its beneficial ownership above 19.99%, meaning the full warrant cannot simply be added to its existing 19.9% stake.
Notably, WTI’s influence already extends into Cypherpunk’s boardroom. The investor has exercised rights to designate William McEvoy and Khing Oei as directors, while Cypherpunk’s governance committee approved the mining purchase as a related-party transaction.
The deal therefore gives Cypherpunk a much larger role in Zcash immediately, while leaving much of the equity cost subject to a shareholder vote.
For investors, that vote will determine how far Cypherpunk can expand its share base to finance a strategy that now combines nearly one-fifth of Zcash’s mining power with a treasury already approaching 2% of circulating supply.
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