Arcane Crypto has plummeted on the Stockholm Stock Exchange over the past two years, with the stock currently trading for just four cents. The decline since the peak in February 2021 is more than 90 percent.
The company has yet to report results for the entirety of last year, but for the three quarters of 2022 the loss before tax was SEK 80 million, while cash holdings fell significantly over the year.
On Thursday, Arcane reported that it had secured funding from crypto representative Cowa, with the prospect of a “strategic transaction,” the press release reads.
But managing director Torbjørn Bull Jenssen denies there is any talk of a potential takeover.
– This is not what is being evaluated now. What we are looking for is some form of fusion.
The agreement involves Arcane receiving a convertible loan of up to $2 million from Cowa, which the latter can settle in the form of a conversion into shares in Arcane. This is equivalent to about SEK 20 million.
– A bit like dating
Cowa is a European bitcoin mining company that offers itself “green” mining of bitcoins using hydropower and other renewable sources.
Managing Director Bull Jenssen stated that it would be explored if there was a basis for a merger between the two companies. There’s no firm framework for the time perspective, but Chief Arcane says both parties are interested in getting clarification on whether this “life is made” quickly.
– It’s a bit like dating, he says.
Arcane operates by mining the world’s largest digital currency Bitcoin through its subsidiary Arcane Green Data, but in recent years has also expanded its operations to include exchange and trading.
Arcane was started by high-profile investors Kristian Lundkvist and Ketil Skorstad, who are the two largest shareholders in the company.
The terms of the loan mean that Cowa can redeem Arcane shares at SEK 0.037 per share, depending on how much Arcane draws out of the total loan. The loan is due one year from the first drawdown, as the notice states.
When asked how much of a stake the Cowa could have, Bull Jenssen replied that it was “too early to say anything about that”.
– The deal can be done if we find the tone, and if it increases shareholder values. They would then take a smaller share of a larger company, the total value of which should offset the potential dilution the merger would cause, says the general manager.
DN was in contact with Lundkvist’s largest owner Thursday evening, who says he has no opportunity to comment on the loan due to his position on the company’s board. Ketil Skorstad did not respond to DN’s inquiries Thursday night, but the third-largest shareholder, poker player Morten Klein, called the agreement “exciting.”
– I think the merger could be a win-win situation for the owners, so we’ll see how the negotiations go, he says.
Known need for financing
Bull Jenssen says there has been a lot of interest from several quarters in the collaboration. Since Arcane had a known funding need, Cowa wanted to provide a liquidity arrangement.
– We chose to enter into a loan agreement due to the known need for financing, which means we can prioritize and focus on talks with Cowa, where we also expect them to be a good match, says Bull Jenssen.
The third quarter figures show a decrease in turnover of just under 36 percent at Arcane, compared to the same quarter of 2021. Turnover fell from just over SEK 81 million in the third quarter of 2021 to SEK 52 million in the same quarter of last year.
Bitcoin is up about 45 percent so far this year, but over the past year five crypto companies have gone bankrupt with debt obligations of up to NOK 850 billion, DN wrote earlier this year. As is known, shock waves went through the crypto world last fall, when FTX collapsed spectacularly.
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