Bitcoin Depot: crypto ATM taps Spac cash

The special purpose acquisition companies boom has fizzled. The cryptocurrency bubble has burst. Leave it to Wall Street to find a way to merge these out of favour asset classes.

Bitcoin Depot is a bitcoin ATM operator that allows users to buy bitcoin or other digital currencies with cash at over 7,000 kiosks across North America. It is going public by merging with blank cheque company GSR II Meteora Acquisition at a $755mn enterprise value.

Higher interest rates, a weaker stock market and heightened regulatory scrutiny have dulled investor appetite for Spacs. Only 72 such investment vehicles have listed in the US so far this year, raising $11.9bn, according to data from the London Stock Exchange Group. That is a fraction of the $116.8bn raised during the same period last year. Among this year’s newly listed Spacs just three have found a company to merge with. None have yet closed.

Yet Bitcoin Depot has managed to negotiate a rich valuation. The deal values its equity at 147.5 times net income reported for 12 months to June. A year ago, the company might have justified this lofty multiple with even loftier projections. But US regulators are clamping down on this practice. Bitcoin Depot has chosen not to provide any forward guidance.

Instead the Atlanta-based company points to transaction volume growth — which it claims is decoupled from crypto prices. Revenue for the first six months of 2022 rose 30 per cent to $322mn, while bitcoin prices fell to a third of their November 2021 peak.

It is hard to see how growth can be sustained. Bitcoin Depot’s fees are high. It takes a 20 per cent commission on the value of the transaction plus a $3 handling fee. Plus, the FBI also has sounded the alarm over a rise in bitcoin ATM scams. Spac merger deals are falling apart at a rapid pace. It is an awkward time to go through with a transaction like this.