A company that started in 2001 to provide staffing services to film productions is now jumping into the booming blockchain industry, hoping to raise as much as $40 million when its stock began trading Thursday on the Nasdaq.
The Dallas-based company changed its name to Applied Blockchain a year ago and started buying mining equipment, according to its prospectus. But, like other companies, it quickly realized it could make more money by buying land and building co-hosting facilities to rent out to miners and other customers.
After China cracked down on crypto mining in mid-2021, miners had to flee and find space elsewhere, leading to a surge in demand for facilities in the U.S.
By allowing customers to lease space and access electricity to mine crypto assets, Applied Blockchain hopes to bring 800 megawatts online by May 2023; 1.8 gigawatts by May 2024; and 5 gigawatts over the next five years.
The company offered eight million shares at $5 per share under the ticker symbol APLD, according to an announcement Wednesday. Shares closed Thursday at $4.78.
The offering was a result of two downward revisions for the company. Applied Blockchain originally said it would offer 3.2 million shares at an estimated mean price of $18.54, according to a regulatory filing from last week. It then changed that to 8.6 million shares at a mean price of $7, which would raise around $60 million, according to a filing early Tuesday.
Applied Blockchain has 47 full-time employees and seven independent contractors on its team, which works out of an office on Turtle Creek Boulevard, according to its filing.
The company says it will mostly host servers securing the Bitcoin network, but can also host hardware for artificial intelligence and machine learning. Its customers can put their hardware in Applied Blockchain’s facilities, which provide operational and maintenance services for a fixed fee.
Applied Blockchain built its first data center in North Dakota after using a subsidiary to purchase property in August, the filing said. Construction started in September and the facility was brought online Feb. 2. Applied Blockchain said it has “designed a plan for a prefabricated facility and organization within the facility that can be delivered and installed quickly.”
The first facility is providing 55 megawatts of energy and services to customers, according to the prospectus. The company plans to bring on the remaining 45 megawatts in the second quarter.
Applied Blockchain has signed up four customers, which will account for the total energy available at the first facility and 85 megawatts of energy at its future second facility, the filing said. The company noted that it has identified two additional sites for future facilities and several potential customers to fill them.
The Dallas company doesn’t have a facility in Texas but, on Nov. 24, it entered into a letter of intent to develop a facility in the state with 200 megawatts of wind power, the prospectus said. But the company said there isn’t a guarantee that it will happen.
The company was started in May 2001 in Nevada as Reel Staff Inc. to provide staffing services to film, video and TV production companies, according to the filing. The following year, it changed its name to Flight Safety Technologies Inc. after a merger. In October 2009, it changed its name to Applied Blockchain Science Products Inc. before ceasing operations in 2014. From 2015 until May 2021, it was considered a shell company.
As of May 31, 2021, Applied Blockchain’s cash and cash equivalents were approximately $11.7 million, according to the prospectus.
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When it ceased being a shell company last year, Applied Blockchain entered into the Ethereum and Altcoin mining market with enthusiasm, completing an oversubscribed private investment of $16.5 million in April, according to an announcement. Then, in July, it raised $32.5 million through a private stock sale led by Bitmain, headquartered in Beijing. Bitmain also became a strategic partner for the company, joining SparkPool and GMR.
Applied Blockchain CEO Wes Cummins previously served as a board member of the company from 2007 to 2020. He was previously the founder and CEO of 272 Capital LP, a Dallas-based investment adviser, which he sold to B. Riley Financial Inc. in August 2021. Prior to that, he served as an analyst with Dallas investment advisory firm Nokomis Capital LLC from 2012 to 2020.
The company’s chief financial officer is David Rench, who co-founded the Austin-based software company ihiji in 2010. After the company was acquired in 2017, he became CFO of Hirzel Capital, an investment management company.
In its prospectus, the company noted that it has “little operating history in the co-hosting business with limited sources of revenue and may be unable to increase our revenue from operations or raise additional capital needed to grow out business or become profitable.”
Applied Blockchain said it’s also looking into the benefits of converting to a real estate investment trust.