Bitcoin Miner Iris Energy Sells $100 Million in Equity to B. Riley

Iris Energy, a publicly traded sustainable Bitcoin mining company (IREN), has agreed to sell investment bank B. Riley Financial up to $100 million in equity over a two-year period.

It’s B. Riley’s second significant investment in the mining sector (it signed the same $100 million deal with Core Scientific in July) despite the industry facing tougher competition and shrinking profits amid the crypto bear market. The move shows the continued interest some traditional financial firms still have in Bitcoin even in the face of obvious headwinds.

According to a archiving with the SEC on Friday, B. Riley could buy up to 25 million IREN shares in the 24 months after Sept. 23, equivalent to a 31% stake in the company. Iris has already issued 191,174 ordinary shares of this as consideration for the bank’s commitment.

“We intend to use any proceeds from the facility to fund our growth initiatives (including hardware purchases and the acquisition and development of data center sites and facilities), and for working capital and general corporate purposes,” Iris said in the filing.

Iris added that the proceeds from the sale cannot be used by Iris in ways that B. Riley does not agree with, or that may “not provide a significant return.”

The Iris share closed down 9% on Friday, the day of filing. The stock has fallen 35% in the past month, and over 85% in the past year.

Such stock losses are common across a wide range of crypto firms this year. Core Scientific (CORZ), the other Bitcoin miner B. Riley has invested in, has fallen by about the same amount in the past year. The publicly traded miner was forced to dump the vast majority of Bitcoin holdings in Q2.

Bitcoin miners profit by earning a fixed number of Bitcoins each time they mine a block, which secures the network. Mining these blocks using a process called proof-of-work takes a lot of energy, which has led many critics to dismiss Bitcoin as an environmental blight – something critics can no longer say about the Ethereum network after it switched to proof of effort.

As Bitcoin’s price has fallen in 2022, so have miner profits. This had led to large Bitcoin sales and even bankruptcy among mining companies. Adding to the problem is that the network’s hash rate continues to rise, meaning miners must become increasingly cost-effective to remain competitive.

Nevertheless, large mining companies invest in the long term. Despite sell more coins in July, Core Scientific deployed another 14,000 ASIC servers in the same month.