Mining crypto

Crypto mining startup finds unlikely partner in Duluth maker – Duluth News Tribune

DULUTH — So how did Ikonics — a modestly-sized maker of engraving and imaging products in Duluth — become an acquisition target for an East Coast cryptocurrency mining startup?

Representatives for Ikonics lover TeraWulf Inc. declined to answer this question, posed by the News Tribune in recent weeks.

But the more likely answer seems to be that Ikonics was a relatively inexpensive, vulnerable, and underlisted company that was already listed on the Nasdaq stock exchange.

Easton, Maryland-based TeraWulf is looking for capital to launch its bitcoin mining business, which depends on the rapid buildup of large amounts of computing power, as well as access to a supply. regular inexpensive electricity.

TeraWulf also needs investors, but bringing a company to market through an initial public offering is a long, expensive, and complicated undertaking. The company saw a faster route.

She bought a company that was already publicly traded, then took it in a new direction.

From the start, TeraWulf made it clear that it had no interest in expanding Ikonics’ legacy business. In fact, it has announced its intention to sell these assets and businesses related to screen printing, etching and photochemistry applications.

Sue Boudrie, operations manager for Ikonics Advanced Material Solutions, looks through a perforated engine intake liner on September 25, 2018. Ikonics uses abrasives to create thousands of tiny holes in the material, which is used to dampen sound on an Airbus A-320. Ikonics, which is up for sale, employs 83 people companywide, including 78 in Duluth, according to its website.

Bob King/Dossier/Duluth News Tribune

Ikonics is not a big manufacturer at all. But its website says the company employs 83 people, including 78 in Duluth.

That’s a good number of well-paying local jobs.

It’s unclear what will become of them, however, as TeraWulf remains a strong seller.

At the time of the “merger,” Ikonics investors were promised that for every share of the company they held, they would receive:

  • $5 cash
  • Part of TeraWulf
  • A contingent value right allowing them to receive a share of the proceeds of any future sale of the legacy business made within 18 months.

Ikonics began trading as WULF on December 7, 2021. As such, Ikonics investors will financially benefit from any sales that take place before this window closes in June 2023.
Local Ikonics officials would not comment on the status of Ikonics’ current operations or sales prospects, redirecting those questions to TeraWulf. For its part, TeraWulf representatives declined to discuss the matter with the News Tribune.

But there have been recent signs of movement.

The News Tribune has confirmed that a local non-profit organization is doing due diligence in anticipation of closing the purchase of Ikonics’ new facility, located at 2302 Commonwealth Ave., inside a park industrial created on the site of the former Atlas Cement factory.

The deal has yet to be finalized, but informed parties have indicated that it appears imminent, assuming no red flags arise in the meantime.

Terms of the current transaction were not disclosed, but St. Louis County last estimated the property’s market value at more than $4.5 million. Ikonics built the single-level facility in 2008 and then expanded it several years later to 35,480 square feet.

IkonicsOpenHouse16_1308.jpg
Guests and employees celebrate the expansion of Ikonics’ Commonwealth Avenue facility with a ribbon cutting and reception on September 22, 2016. Although the deal has yet to be finalized, the sale of ownership at a local non-profit should end soon, barring any unforeseen complications.

Bob King/Dossier/Duluth News Tribune

If the sale goes through, Ikonics still has another facility in Duluth. And Chris Fleege, director of Duluth’s planning and economic development division, said the city was assured any sale would have little impact on production because he was told the location of Commonwealth Avenue the business was primarily a warehouse.

Ikonics’ other facility is a four-story, 48,160-square-foot former manufacturing facility at 4832 Grand Ave., with an estimated market value of nearly $1.17 million.

Ikonics has also inquired about temporarily leasing space in its Commonwealth Avenue building while it finds a longer-term solution, according to an official at the nonprofit, which is looking to buy the building. ‘building.

So far, Fleege said city staff have not received any requests for help orchestrating a change of ownership at Ikonics or lining up additional new space to accommodate its ongoing local operations.

While Duluth City Council Speaker Arik Forsman admitted he didn’t know what a sale of Ikonics’ local operations might bring, he said, “It would be a shame to see these jobs and facilities stop working. So hopefully they find a buyer that’s in the same condition and sees them as value, and they can keep doing what they’re doing and maybe even expand.”

The buzz around TeraWulf was intense, especially as the company touted its plans to operate using at least 90% carbon-neutral energy sources. The company brought its first facility online in March – the hydropower-based Lake Marinette Cryptomine in upstate New York. TeraWulf is also working on opening a second nuclear-powered bitcoin mining facility in Pennsylvania later this year.

One of the criticisms of the industry has been the amount of power it consumes, as racks full of computers race to solve math problems, add to a blockchain database and get rewarded by a cryptocurrency like they do.
BitcoinEnergyConsumption.com reports that it takes 2,170 kilowatt hours of energy to produce a single bitcoin, which is as much as the average US household would use in 74 days. On an annual basis, bitcoin mining operations worldwide are now expected to consume roughly the same amount of energy as Thailand, with a population of nearly 70 million.

Cryptomining can be such a powerhouse that China has completely banned it.

Yet TeraWulf promised to be able to mine and develop without harming the environment.

Gwyneth Paltrow -- Milken Institute Global Conference 2022
Actor Gwyneth Paltrow, founder and CEO of Goop, speaks during the 2022 Milken Institute Global Conference in Beverly Hills, California, U.S., May 4, 2022. She was just one of celebrities drawn to invest millions of dollars in TeraWulf upon release.

Mike Blake/Reuters

This proposal was an attractive pitch, attracting investors including A-list celebrities. Actress Gwyneth Paltrow was part of a group that provided $200 million in debt and equity financing when TeraWulf launched on the Nasdaq. Other high-profile investors in the group included showbiz personalities Mindy Kaling and Lilly Singh, Beautycon Media CEO Moj Mahdara, TikTok global marketing manager Nick Tran and KITH CEO Ronnie Fieg.

As TeraWulf’s Nasdaq debut on Dec. 7 approached, excitement grew, and so did the company’s stock price.

Terawulf.jpg

Gary Meader/Duluth News Tribune

Ikonics stock was trading at $11.31 per share the day before the merger deal was announced, but the price jumped to $42.31 on November 19, 2021 following the announcement. of its new owner and speculation that the cryptocurrency, and specifically bitcoin, will continue to grow in value.

But the timing of WULF’s launch could hardly have been worse for its early investors. The stock’s value fell even more sharply than the troubled crypto market. In recent days, TeraWulf briefly traded below $3 per share — a more than 90% drop from Ikonics’ peak just before its ticker symbol was officially changed to WULF.

To be fair, all cryptomining operations have been affected as the value of bitcoin, the biggest share of the crypto market, has more than halved since peaking at over $65,000 in November. And some analysts have suggested that this is actually an opportune time for the intrepid to invest in a downtrodden market and promising start-ups such as TeraWulf.

Bitcoin has rebounded from previous downturns, like the one it experienced in 2017, noted Vivian Fang, an associate professor of accounting who teaches cryptocurrencies at the Carlson School of Business. She said that in her opinion, cryptocurrency is more than a flash in the pan and will endure despite its ups and downs.

Fang explained that cryptocurrency is digital currency built on decentralized systems that rely on cryptography for security. It’s completely digital. There are no actual parts.

“They are basically encryption techniques that are used to ensure that transactions are recorded on the blockchain and that these records cannot be tampered with,” she said.

Fang described what she considers to be the biggest innovations in cryptocurrencies: “They rely on this distributed ledger technology, often called blockchain technology, to record transactions.”

“These transactions are recorded because the blockchain is just a network of computers. And this network allows multiple parties to share data,” she said.

Fang said new data can only be uploaded if participating computers in the chain agree to recognize a new transaction, allowing cryptocurrency to be exchanged and moved from one digital wallet to another.

“These updates or transactions are not determined by a human or a central authority but by software-driven consensus,” she said.

In the case of Bitcoin, the largest cryptocurrency, it relies on a “proof of work” consensus.

“In reality, it’s just a bunch of computers racing their computing power and trying to solve a mathematical problem. You can almost think of it as a complicated puzzle, where you’re looking for a missing piece. And it there’s no algorithm you can use. All of these computers basically use brute force. They try every possible piece to see if it fits,” she said.

“When they find a fit, they announce it to the network, and other computers would agree,” Fang said.

The first successful party receives a reward in the form of the currency that matches the blockchain.