Late last year (2021) Menten Holding Group Ltd (previously called EdtechX and then Menten EdtechX) was IBIS Capital’s first NASDAQ education SPAC (Special Purpose Acquisition Company), announced the launch of a “new business initiative” around blockchain and cryptocurrency.
The EdtechX SPAC listed in Jan 2020 at 435 cents and now trades at about 1.48c, so not a terrific investment for IPO shareholders. As a fund that was supposed to be edtech-focused, they acquired a Chinese language business (Menten) that instead had 114 physical centres and only a tiny online business. In May 2022, Menten announced 2021 losses of US$56m and the closure of 84 centres (74%), a result of both Covid and the Chinese government’s crackdown on tutoring and private education. But how sound is the idea of jumping from edu to crypto, NFTs and the like? To do this the company noted they would have to buy not just the crypto tech, but also, “natural gas, oil mines, and other suitable sites in Canada” to provide the voracious energy demands required to mine cryptocurrencies.
To get the ball rolling they spent $12m buying 1882 bitcoin mining machines from NASDAQ-listed Chinese company, AGM Holdings, working together, “by jointly establishing new funds or providing investment advice” targeting “dollar-based investment funds, high net worth individuals, family offices” as well as assisting Menten in its plans to acquire ”high-quality digital currency companies”. They then entered into a MOU to have these crypto-mining machines (along with 600 XP mining machines from Bitmain Technologies Ltd) located and managed on crypto farms run by private Hong-Kong company, Tokenomics Digital Tech Corporation Limited.
That’s a long way from an education or edtech business. If the investors agree that’s fine, but it does show how SPACtacularly many SPAC investors are underwater. So it’s almost understandable that Menten would grab at any straw to try and recover from what is arguably worse than the 2000 dot com crash. However, crypto is not the investment darling it was a year ago. Mentex recently announced they hold 30.63709267 bitcoins (May 31 @$31,350.30) worth about $960,482, but with no mention of how much energy/money they had paid to generate these (see Appendix A for my estimate). With the world economy in an inflationary downturn, the value of these bitcoins in just a few weeks (June 16 @$21,258.40) fallen almost $309,187 32% by to $651,295. Given the volatility of bitcoin and the rapid increase in energy costs (a key inflationary driver globally), the pivot from edtech to crypto, rather than saving Menten’s investors, has been like hosing petrol onto a burning fire of cash.
So, does it matter that Menten is jumping from edtech to crypto? Apart from the appalling environmental impact and terrible performance for IPO investors, no, but their claim to ‘bring deep industry knowledge, operational value-add and digital growth experience’ to help ‘invest globally in companies ($400m to $2bn in enterprise value)’, does sound rather hollow.
Footnotes
EdtechX 2nd SPAC EdtechX Holdings Acquisition Corp. II
http://www.ibiscap.com/index.php/investment/spac-investments/
Appendix A – My rough back of the envelope calculations
Menten have 2,482 bitcoin mining machines.
Bitmain’s Bitcoin Miner S19 Pro is rated at 3250kw (3.25 kwh).
3.25kwh x 24 x 365 = 28,470 kwh per machine x 2,482 = 70,662,540 kwh p.a.
UK defines a large business gas user as consuming 27,000,000 -277,000,000 kwh pa
Current UK wholesale pricing for a large business gas users is (approx.) is 2.5p per kwh (Q1 2022.)
Est. cost energy cost £1,766,563/US$2,144,775.
Menten and partners may have secured lower gas and energy prices but even if these were 50% lower (unlikely given the current global energy crisis) £883,280/US$1,070,000 then Menten and its shareholders still looks to be underwater even after pivoting from edtech/edu to crypto!
