The Chinese government is cracking down on private tutoring and METX is responding with a new venture. With the increased demand for Bitcoin, METX will be mining the cryptocurrency to help pay for English lessons.
With METX’s latest acquisition of a bitcoin mining operation in Inner Mongolia from a defunct state-owned enterprise, the company is one of the first Chinese companies to enter this space.
METX and Their New Crypto Venture
Meten, which went public in March 2020 through a SPAC deal, announced in September it would venture into cryptocurrency mining as part of its expansion plans and raised nearly $ 60 million in a new round of equity offerings.
The company stated that it was in the process of evaluating both mining machines as well as NFT assets with a view to building its own mining farm in its prospectus for the September raise.
The company is currently searching for low-cost natural gas and oil mines in Canada, Meten said at the time.
This week, the company appears to have taken its first step by purchasing 1,500 units of new generation Bitcoin mining machines for $12 million from AGM Holdings, which recently announced several bulk orders for its Bitcoin ASIC mining chips.
METEN’s transition move follows China’s formal ban on for-profit tutoring – either online or offline – across the Chinese school curriculum, including in the English language.
The company, with an initial market capitalization of nearly $3 billion, is utilizing Bitcoin mining in an attempt to revive its business, which was also adversely affected by China’s regulatory environment – perhaps unexpectedly.
Meten’s Stock Price is Still 98% Off Its Listing High
As of December last year, Meten owned over 100 self-operated learning centers across some 30 Chinese cities, founded in 2006 in Shenzhen.
Meten offers both online and offline English training courses for both adults and juniors. The company lost $26 million in the first half of this year on revenues of $67 million. Tutoring juniors online and offline contributed about 20% of the revenue.
Since Meten was listed in March 2020, its stock price has fluctuated between $27 and $15, with a net loss of $30 million for the first half of that year.
Reuters reported in May this year that China plans to ban K-12 private tutoring businesses on school curriculum subjects – particularly math and English – in two months, which aggravated its stock performance.
As a result of the country’s competitive education system, for-profit tutoring businesses have flourished over the past decades, but now the government is looking to ease educational pressure on both parents and children.
At the time of the crackdown notice, Meten’s stock price hit as low as $0.28 as a result of a wider market sell-off. However, it has since recovered to $0.55, although it is still 98% away from its listing high.
According to Meten’s interim earnings report for 2021, the July ban may “materially harm” its business operations, financial condition and prospects.
Chinese public companies have used Bitcoin mining to bolster their original business lines to great success and failure over the past four years.
BIT Mining, formerly known as the sports lottery company 500.com, began its Bitcoin mining pivot in early 2019 and is now a serious operation. Since it formally announced the pivot and the acquisition of BTC.com early this year, the company has largely avoided the limelight.
The Chinese company Wholeasy, however, had a less fortunate experience. Its $80 million investment in Bitcoin mining equipment in 2018 and subsequent infrastructure build-out in the U.S. failed to pay off as intended and resulted in almost no return on investment.
According to Meten, it has never mined Bitcoins before and has “no assurance” that it will succeed.
According to the firm’s September prospectus, it may not be able to acquire cryptocurrency mining machines at a reasonable cost, or at all, as part of its plan to develop blockchain and cryptocurrency businesses.
“Due to our limited experience with blockchain and cryptocurrency activities, we also face challenges and uncertainties relating to the possibility of success of our new business.”
Meten bought mining equipment from AGM for a higher price than the market rate. Earlier this week, AGM announced it had sold 10,000 of its new generation of Bitcoin miners for $65 million to U.S.-listed Chinese miner CCNC, which represented 18% of Meten’s cost per unit.
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