425: Gryphon Digital Mining Amends Merger Filing, Reveals American Bitcoin Corp.'s Volatile Q1 Performance Amid Strategic Consolidation

Gryphon Digital Mining, Inc. filed an amendment to its Form 8-K, providing updated financial and risk information for American Bitcoin Corp. (ABTC) in anticipation of their proposed merger, which will result in significant dilution for current Gryphon shareholders.

Summary

• Gryphon Digital Mining, Inc. (Gryphon) filed an Amendment No. 1 to its Current Report on Form 8-K, primarily to update information regarding American Bitcoin Corp. (ABTC) and the risks and financial details related to their proposed merger.
• The merger, dated May 9, 2025, will see Gryphon acquire ABTC, with Gryphon being renamed American Bitcoin Corp. (the Combined Company) and ABTC's business becoming the core of the Combined Company.
• Upon closing, current Gryphon stockholders are expected to own 2.0% of the Combined Company's common stock on a fully diluted basis, while ABTC stockholders will own approximately 98.0%.
• Hut 8 Corp., through its wholly-owned subsidiary ABH, will be the controlling stockholder of the Combined Company, holding approximately 64.37% of outstanding common stock and 80.00% of total combined voting power.
• ABTC's business objective is Bitcoin accumulation through efficient mining and disciplined reserve expansion, owning over 60,000 Bitcoin miners with a cumulative hashrate of 10.17 EH/s and a weighted average fleet efficiency of 21.2 J/TH as of May 31, 2025.
• ABTC accumulated approximately 215 Bitcoin in reserve since launching on April 1, 2025.
• For the three months ended March 31, 2025, ABTC reported a net loss of $100.6 million, a significant decline from a net income of $230.4 million in the same period of 2024.
• Q1 2025 revenue for ABTC decreased to $12.3 million from $30.3 million in Q1 2024, primarily due to a reduction in Bitcoin mined (135 BTC vs. 592 BTC) caused by reduced uptime for a fleet upgrade, increased network difficulty, and the April 2024 halving event.
• ABTC's Q1 2025 results included a $112.4 million loss on digital assets, compared to a $274.5 million gain in Q1 2024, driven by a decrease in Bitcoin price from $93,354 (Dec 31, 2024) to $82,534 (Mar 31, 2025).
• For the full year ended December 31, 2024, ABTC reported a net income of $428.9 million, a substantial increase from $39.6 million in 2023, largely due to a $509.3 million gain on digital assets from rising Bitcoin prices.
• ABTC completed a private placement on June 27, 2025, raising $220.06 million in gross proceeds ($215 million net) by issuing 11,002,954 shares of ABTC Class A Common Stock, intended for strategic goals and Bitcoin/miner purchases.
• Gryphon incurred approximately $0.9 million in merger-related fees as of June 25, 2025, with an anticipated $1.1 million more, while ABTC incurred $4.3 million with an anticipated $0.9 million more.

Sentiment

Score: 4

Explanation: The sentiment is cautiously negative. While the merger represents a strategic consolidation and ABTC has a clear Bitcoin accumulation strategy backed by a recent capital raise, the significant financial underperformance in Q1 2025 (swing to net loss and negative Adjusted EBITDA) and the substantial dilution for Gryphon shareholders introduce considerable near-term concerns. The inherent volatility and regulatory risks of the crypto industry also weigh on the outlook.

Positives

• ABTC's strategic objective is Bitcoin accumulation through efficient mining and disciplined reserve expansion.
• As of May 31, 2025, ABTC owned over 60,000 Bitcoin miners with a cumulative hashrate of 10.17 EH/s and a weighted average fleet efficiency of 21.2 J/TH.
• ABTC accumulated approximately 215 Bitcoin in reserve since launching on April 1, 2025.
• ABTC completed a private placement on June 27, 2025, raising $220.06 million in gross proceeds ($215 million net) to fund strategic and Bitcoin accumulation goals.
• Cost of revenue for ABTC decreased by $5.1 million in Q1 2025 compared to Q1 2024, and by $4.1 million in FY 2024 compared to FY 2023, due to relocating miners to lower-cost self-mining sites and deploying Hut 8's energy curtailment software, Reactor.
• ABTC reported significant gains on digital assets in FY 2024 ($509.3 million) and FY 2023 ($33.5 million) due to increases in Bitcoin prices.
• ABTC's net income from continuing operations significantly increased to $433.75 million in FY 2024 from $39.61 million in FY 2023.
• ABTC's Adjusted EBITDA significantly increased to $517.6 million in FY 2024 from $37.0 million in FY 2023.

Negatives

• ABTC's revenue significantly decreased by $18.0 million to $12.3 million in Q1 2025 compared to $30.3 million in Q1 2024, primarily due to a decrease in Bitcoin mined (135 BTC vs. 592 BTC).
• ABTC experienced a substantial swing from a net income of $230.4 million in Q1 2024 to a net loss of $100.6 million in Q1 2025.
• ABTC's Q1 2025 results included a $112.4 million loss on digital assets, contrasting sharply with a $274.5 million gain in Q1 2024, driven by a Bitcoin price decrease from $93,354 (Dec 31, 2024) to $82,534 (Mar 31, 2025).
• ABTC's Adjusted EBITDA swung to a negative $122.6 million in Q1 2025 from a positive $281.45 million in Q1 2024.
• Gryphon stockholders will experience significant ownership and voting power dilution, expected to own only 2.0% of the Combined Company's common stock and less than 0.01% of the total combined voting power on a fully diluted basis.
• Hut 8 will control the Combined Company, holding approximately 80.00% of the total combined voting power, which may lead to conflicts of interest with other stockholders.
• ABTC is an early-stage company with a very limited operating history, facing uncertainties common to companies in early development stages.
• The closure of ABTC's Drumheller, Alberta mining site due to lack of profitability (elevated energy costs, voltage issues) resulted in a $3.1 million impairment loss in Q1 2024.
• Gryphon and ABTC expect to incur substantial fees and expenses related to the Mergers, with Gryphon anticipating $1.1 million and ABTC anticipating $0.9 million in additional costs prior to closing, on top of $0.9 million and $4.3 million already incurred, respectively.

Risks

• Uncertainty regarding the completion of the Mergers, with conditions that may not be satisfied, including timely stockholder approval.
• Gryphon may be required to pay ABTC a termination fee of $5,000,000, plus out-of-pocket expenses, if the Mergers are not completed under certain circumstances.
• Substantial disruptions and uncertainty surrounding Gryphon's and ABTC's respective businesses due to efforts to complete the Mergers, potentially affecting employee retention and business relationships.
• Gryphon stockholders will experience significant ownership and voting power dilution, potentially not realizing commensurate benefits.
• The intended strategic and financial benefits of the Mergers may not be fully realized, or may take longer than expected.
• The market value of Gryphon and ABTC may change between the preliminary proxy statement/prospectus date and the Closing, and the fairness opinion will not reflect subsequent changes.
• Regulatory authorities (HSR Act) may impose conditions that could adversely affect the Combined Company or delay/prevent the Mergers.
• The Mergers may be completed even if events occur prior to Closing that materially and adversely affect Gryphon or ABTC, as certain changes are excluded from 'material adverse effect' clauses.
• Officers and directors of Gryphon and ABTC have interests in the Mergers that may differ from or be in addition to, the interests of stockholders generally (e.g., severance payments, accelerated vesting).
• Certain provisions in the Merger Agreement (no-shop, force the vote, termination fees) may discourage alternative takeover proposals.
• Gryphon and ABTC will be subject to contractual restrictions while the Mergers are pending, potentially preventing attractive business opportunities.
• The market price of Gryphon Common Stock may decline due to negative investor reactions or diversion of management attention.
• If the Mergers are not completed, the Gryphon Board may pursue dissolution and liquidation, potentially leading to significant losses for stockholders.
• ABTC stockholders may receive shares of Combined Company Common Stock with a value less than or greater than the fair market value of their ABTC Common Stock, as the exchange ratio is not adjustable based on market price fluctuations.
• Litigation related to the Mergers could incur significant costs, distract management, and delay or enjoin the Mergers.
• ABTC's business is highly concentrated in Bitcoin, a highly volatile asset, and fluctuations in its price are likely to influence financial results.
• ABTC's financial results are expected to be more volatile due to the adoption of ASU 2023-08, requiring Bitcoin holdings to be measured at fair value with gains/losses recognized in net income.
• Failure to grow hashrate may prevent ABTC from competing effectively, as global network hashrate increases.
• Inability to purchase Bitcoin miners at scale or face delays/difficulty in obtaining new miners due to supply chain issues, geopolitical matters, or manufacturer defaults.
• Risks associated with holding Bitcoin for its own account, including lack of insurance, security breaches, cyberattacks, and the risk of Bitcoin being considered property of a bankruptcy estate.
• Competition from other methods of investing in Bitcoin, such as spot Bitcoin exchange-traded products (ETPs), could adversely affect the value of ABTC's securities.
• The further development and acceptance of the Bitcoin network is uncertain and subject to factors like regulatory scrutiny, market participant failures, and negative publicity.
• Reliance on third-party mining pool service providers (Foundry, Luxor) for mining revenue payouts exposes ABTC to risks of system downtime, cyberattacks, and inaccurate record-keeping.
• Hedging transactions to mitigate Bitcoin price exposure may expose ABTC to counterparty risk and may not be successful.
• Future Bitcoin halving events will reduce mining rewards, and if Bitcoin's value does not adjust proportionally, ABTC's profitability could decrease.
• The possibility of Bitcoin mining algorithms transitioning to proof-of-stake validation could render ABTC less competitive.
• A malicious actor or botnet obtaining control of a majority of the Bitcoin network's processing power could manipulate the blockchain.
• Forks in the Bitcoin network may occur, affecting the value of Bitcoin held by ABTC, and ABTC may not be able to realize the economic benefit of new assets from forks.
• Curtailment of energy use due to heightened energy prices or grid shortages may negatively affect ABTC's ability to mine Bitcoin.
• ABTC's operations are highly dependent on maintaining a good relationship with Hut 8 and its performance under the Hut 8 Agreements (MCSA, MMSA, Exclusivity, Shared Services).
• If Hut 8 Agreements are terminated or not renewed, ABTC may not find alternative providers on favorable terms.
• ABTC may experience liquidity constraints and may be unable to raise additional capital in a timely manner or on acceptable terms.
• Failure of critical systems related to ABTC's operations (power, equipment, network connectivity, cybersecurity) could result in service interruptions or damage.
• ABTC may not be able to compete effectively against current and future competitors, especially for critical inputs like miners and low-cost electricity.
• Termination or higher renewal rates of Hut 8's leases for mining sites could adversely affect ABTC.
• Hut 8 facilities hosting ABTC's miners may experience damage not fully covered by insurance.
• ABTC is subject to risks associated with its need for significant electrical power, including price volatility and supply disruptions.
• Geopolitical, social, economic, and other events (e.g., tariffs, conflicts, inflation) in the U.S., Canada, or elsewhere could adversely impact ABTC's business.
• ABTC is exposed to cybersecurity threats and breaches, which could result in loss of assets, reputational harm, and increased costs.
• ABTC faces risks of Internet-related disruptions, as its mining operations depend on third-party Internet access.
• ABTC's success depends on key personnel from both ABTC and Hut 8, and the loss of these individuals could harm the business.
• ABTC is an early-stage company with limited operating history, facing uncertainties in implementing its business plan and achieving profitability.
• ABTC may not adequately respond to price fluctuations and rapidly changing technology in the industry.
• If ABTC does not accurately predict its facility requirements or if Hut 8 fails to develop/operate facilities, it could adversely affect ABTC's business.
• Future acquisitions, strategic alliances, or joint ventures may negatively affect operating results, dilute ownership, or incur significant expenses.
• ABTC operates in the United States and Canada, exposing it to international business risks, including currency risks and increased difficulty in protecting intellectual property.
• Banks and financial institutions may not provide or may cut off services to digital asset-related businesses.
• ABTC's operations are subject to various evolving legal, regulatory, governmental, and technological uncertainties, with potential for significant fines or operational restrictions.
• The application of the U.S. Commodities Exchange Act of 1936 (CEA) and CFTC regulations to ABTC's business is unclear and subject to change.
• Regulatory changes or interpretations may require ABTC's registration as a money services business, incurring significant compliance costs.
• If ABTC were deemed an investment company under the Investment Company Act of 1940, it could make its business impractical or impossible.
• Interactions with a blockchain may expose ABTC to specially designated nationals (SDN) or blocked persons, leading to potential sanctions.
• ABTC may be subject to substantial environmental or energy regulation, and increased scrutiny regarding ESG matters could impose additional costs.
• Physical risks related to climate change (severe weather events) pose a threat to ABTC's operations.
• Legal proceedings from time to time could adversely affect ABTC, incurring significant expenses and diverting management attention.
• Changes in tax laws or unanticipated tax liabilities could adversely affect ABTC's effective income tax rate and profitability.
• ABTC may not protect its intellectual property rights effectively, and its technology may infringe on third-party rights.
• The historical financial information of ABTC may not be representative of its results or financial condition as a standalone public company or of the Combined Company after the Mergers.
• The unaudited pro forma condensed combined financial information may not be representative of the Combined Company's future results.
• The proposed multi-class capital structure of the Combined Company will concentrate voting control with Hut 8 and certain principal shareholders, limiting influence of other stockholders.
• The multi-class structure may adversely affect the trading market for Class A Common Stock, potentially leading to exclusion from certain stock indices.
• Hut 8's interests may conflict with the interests of the Combined Company and its other stockholders.
• The Combined Company will rely on exemptions from certain Nasdaq corporate governance requirements for controlled companies.
• Future sales and issuances of the Combined Company's Common Stock, including under the 2025 Plan, could result in dilution and cause the stock price to fall.
• Sales of a substantial number of shares by significant stockholders could cause the Class A Common Stock price to fall.
• Failure by the Combined Company to comply with Nasdaq listing standards could result in delisting.
• The Combined Company's operating results may fluctuate significantly or fall below expectations, causing stock price volatility.
• The Combined Company will incur increased costs as a public company, and management will devote substantial time to compliance.
• Key members of the Combined Company's management team will have limited experience managing a public company.
• The Combined Company will pursue different strategies than Gryphon pursued independently.
• Management will have broad discretion over cash and cash equivalents, which may not align with investor expectations.
• If equity research analysts do not publish research or publish unfavorable reports, the stock price and trading volume could decline.
• The Combined Company is not expected to pay dividends on Common Stock, so return on investment depends on price appreciation.
• The Combined Company's ability to use Gryphon's net operating loss carryforwards (NOLs) and tax credit carryforwards may be subject to limitation due to ownership changes (Section 382 of the Code).
• If the Mergers do not qualify as a reorganization for U.S. federal income tax purposes, U.S. Holders of ABTC Common Stock will be required to recognize gain or loss.

Future Outlook

The Combined Company intends to accumulate Bitcoin and will continue to evaluate market conditions for future capital raises to expand its Bitcoin reserve. It aims to leverage its operational scale, mining expertise, and Bitcoin reserve to drive strategic ecosystem leadership and support Bitcoin's institutional adoption and infrastructure development. The Combined Company expects to retain future earnings for business development, operation, and expansion, and does not anticipate declaring or paying cash dividends for the foreseeable future.

Management Comments

• ABTC's business objective is Bitcoin accumulation and it aims to pursue that goal through a levered strategy that combines efficient Bitcoin mining, disciplined Bitcoin reserve expansion and focused ecosystem engagement.
• ABTC's foundation is built on producing Bitcoin below-market cost through a capital efficient, infrastructure-light operating model.
• Bitcoin accumulation is not a side effect of ABTC's business. It is the business.
• ABTC's Layer 2 strategy is designed to transform its Bitcoin production into long-term Bitcoin ownership.
• ABTC believes its position as a Bitcoin accumulator and low-cost Bitcoin miner creates distinctive opportunities to influence ecosystem development in ways that reinforce its core accumulation strategy while contributing to Bitcoin's long-term ecosystem success.
• ABTC recognizes transaction fees as Bitcoin mining's long-term economic foundation and views initiatives that grow sustainable, fee-generating network activity as aligned with its Bitcoin accumulation strategy.
• ABTC's potential Layer 3 initiatives will be evaluated against its fundamental objective of maximizing Bitcoin ownership per share.
• Management believes the assumptions underlying ABTC's combined financial statements, including the expense methodology and resulting allocation, are reasonable for all periods presented.

Industry Context

The announcement highlights the ongoing consolidation and strategic shifts within the highly competitive Bitcoin mining industry. ABTC's 'infrastructure-light' model, relying on colocation services from Hut 8, represents a capital-efficient approach to Bitcoin accumulation, contrasting with traditional models that involve significant investment in physical infrastructure. The industry continues to grapple with Bitcoin price volatility, increasing network difficulty, and the impact of halving events on mining profitability. The emergence of spot Bitcoin ETPs has introduced new avenues for investors to gain Bitcoin exposure, potentially affecting the valuation of publicly traded mining companies. Regulatory scrutiny, particularly from the SEC and CFTC, remains a significant factor, with evolving frameworks and potential for new legislation impacting digital asset businesses.

Comparison to Industry Standards

• ABTC's hashrate of 10.17 EH/s and efficiency of 21.2 J/TH as of May 31, 2025, positions it as a significant player in the Bitcoin mining space, comparable to other large-scale institutional miners like Marathon Digital Holdings (MARA) and Riot Platforms (RIOT), which also operate at multi-exahash scales and continuously seek to improve fleet efficiency.
• ABTC's strategy of prioritizing Bitcoin miner ownership and Bitcoin reserve growth over land/building ownership, leveraging Hut 8's colocation services, aligns with a capital-efficient model that some industry participants are adopting to reduce fixed infrastructure investments, similar to how some cloud computing providers offer infrastructure-as-a-service rather than owning all physical data centers.
• The significant swing in ABTC's Q1 2025 financial performance (net loss of $100.6 million vs. net income of $230.4 million in Q1 2024) due to Bitcoin price fluctuations and reduced mining output reflects the inherent volatility and operational challenges faced by all Bitcoin miners, including publicly traded peers like CleanSpark (CLSK) and Bitfarms (BITF), whose quarterly results are heavily influenced by Bitcoin's market price and network dynamics.
• The private placement of $220.06 million by ABTC demonstrates a common industry practice of raising capital to fund growth and Bitcoin accumulation, similar to how other large miners frequently access public or private markets for expansion capital, especially after halving events or during periods of market opportunity.
• The high dilution for Gryphon shareholders (2.0% ownership in the combined entity) is a stark example of the consolidation trends in the industry, where smaller entities are absorbed by larger, more established players, often at significant dilution to the acquired company's existing shareholders, a pattern seen in various M&A activities across the digital asset sector.

Management Changes

Corporate Governance

Legal Proceedings

• ABTC is not presently a party to any legal or regulatory proceedings that, in its management's opinion, would individually or taken together have a material adverse effect on its business, financial condition, or results of operations.
• ABTC is subject to regulatory oversight by numerous federal, state, local, and other regulators and may become subject to various legal proceedings, inquiries, investigations, and demand letters in the course of its business.
• Gryphon has certain pending litigation matters, as referenced in its Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Related Party Transactions

• ABTC has entered into a Master Colocation Services Agreement (MCSA) with U.S. Data Mining Group, Inc. (USDMG), a wholly-owned subsidiary of Hut 8, for colocation and hosting services for ABTC's Bitcoin miners.
• ABTC has entered into a Master Management Services Agreement (MMSA) with USDMG for management, oversight, strategy, compliance, operational, and other services for its Bitcoin mining operations.
• ABTC has entered into a Services Agreement (Shared Services Agreement) with USDMG for back-office support services, including accounting, HR, payroll, IT, legal, and vendor management.
• ABTC has entered into a Put Option Agreement with Zephyr Infrastructure, LLC, a wholly-owned subsidiary of Hut 8, granting Zephyr the right to sell Bitcoin miners purchased under a Bitmain Agreement to ABTC.
• Hut 8, through its wholly-owned subsidiary ABH, is ABTC's controlling stockholder and is expected to be the controlling stockholder of the Combined Company, with the power to determine decisions including related party transactions.

Stakeholder Impact

• **Shareholders (Gryphon):** Will experience significant dilution of ownership and voting power (expected to own 2.0% of Combined Company common stock and less than 0.01% of voting power), potentially without commensurate benefit if merger synergies are not realized. Their ability to influence corporate matters will be substantially reduced.
• **Shareholders (ABTC/Hut 8):** Hut 8 will gain controlling interest (80% voting power) in the Combined Company, consolidating its position in the Bitcoin mining sector and potentially benefiting from ABTC's strategic Bitcoin accumulation and efficient operations.
• **Employees (Gryphon & ABTC):** Management's attention is diverted to merger completion, which could affect day-to-day operations. Gryphon's CEO, CFO, and SVP of Energy are entitled to severance payments and/or accelerated vesting upon closing, indicating potential changes in leadership roles.
• **Customers/Suppliers/Vendors:** Uncertainty surrounding the merger could affect relationships, potentially leading to deferred decisions or changes in existing business relationships.
• **Creditors:** The document details the settlement of Gryphon's debt through share issuance and cashless exercise of warrants, and ABTC's historical debt restructuring, which impacts the Combined Company's balance sheet and future debt obligations.
• **Regulatory Authorities:** The merger is subject to HSR Act requirements and ongoing scrutiny from SEC, CFTC, and other bodies, which could impose conditions or lead to investigations, impacting the Combined Company's operations and compliance costs.

Next Steps

• Gryphon stockholders need to vote on and approve the Merger Agreement and other related proposals at a Special Meeting.
• The Combined Company will apply to have the Class A Common Stock listed on Nasdaq.
• ABTC may complete further issuances of ABTC Class A Common Stock or other securities prior to the Closing of the merger.
• The Combined Company will need to dedicate internal resources and potentially engage outside consultants to comply with public company regulations, including Sarbanes-Oxley Act requirements.

Key Dates

Recommendation

Keywords

Bitcoin Mining, Cryptocurrency, Merger, SEC Filing, Form 8-K/A, Gryphon Digital Mining, American Bitcoin Corp., Hut 8, Digital Assets, Hashrate, Financial Results, Corporate Governance, Risk Factors, Capital Raise, Nasdaq, Blockchain, ASIC Miners, Financial Reporting, Investment