Power & Digital Infrastructure Acquisition Corp.
PROPOSED BUSINESS COMBINATION: Core Scientific Holding Co.
ENTERPRISE VALUE: $4.341 billion
ANTICIPATED SYMBOL: CORZ
Power Digital Infrastructure Aquisition Corp. proposes to combine with Core Scientific Holding Co., a leader in customizable infrastructure and software solutions to large scale customers for blockchain hosting and digital asset mining.
Core Scientific is the largest blockchain infrastructure, hosting provider and digital asset miner in North America, with estimated year-end power capacity of approximately 510 megawatts through four dedicated facilities strategically located across the United States. The Transaction positions Core Scientific to mine for digital assets and provide and develop hosting and other blockchain services at scale, using low cost, clean and renewable energy for a growing, global decentralized finance industry.
In addition to offering proprietary digital asset mining infrastructure and management software to large-scale partners around the world, Core Scientific’s pending acquisition of Blockcap, Inc. (“Blockcap”), a leader in digital asset mining, positions the Company as North America’s largest vertically integrated self-mining business. Blockcap’s recent acquisition of RADAR, a pioneer in the blockchain technology space, further strengthens Core Scientific’s leadership position and value creation potential through the development of decentralized finance (“DeFi”) products and services. Core Scientific intends to grow its business while maintaining 100% net carbon neutral operations through a combination of clean energy inputs and the purchase of renewable energy credits.
SUBSEQUENT EVENT – 1/23/24 – LINK
- On January 23, 2024, following their Chapter 11 bankruptcy proceedings, the Debtors officially emerged from bankruptcy.
- On this effective date, their previous common stock was canceled and replaced under new organizational guidelines that authorized new common stock with very low par value.
- The reorganized company then issued a variety of new securities, including new common stock, warrants, CVRs, secured convertible notes, secured notes, and GUC CVRs.
- These were issued in compliance with an exemption from the usual securities registration requirements, facilitated by the Bankruptcy Code.
SUBSEQUENT EVENT – 12/21/22 – LINK
- On December 21, 2022, Core Scientific, Inc. and its affiliates (collectively referred to as the “Debtors”) filed for Chapter 11 bankruptcy protection in the Southern District of Texas, under case number 22-90341.
- They are operating as debtors-in-possession, managing their ongoing business activities under court oversight.
- The company is working on a restructuring support agreement with the Ad Hoc Noteholder Group, which holds over 70% of its convertible notes.
- This group has committed to providing more than $57 million in debtor-in-possession financing and supports raising an additional $18 million from other note holders.
- These funds, along with cash from operations, aim to support the company’s restructuring process, cover professional fees, and help the company emerge from bankruptcy.
- The restructuring plan, pending agreement approval, would substantially reduce Core Scientific’s debt and annual interest costs.
- It also proposes converting the debt held by noteholders into a majority of the common stock in the reorganized company.
- General unsecured claim holders and existing shareholders would receive a portion of the reorganized stock and warrants, allowing them to benefit from the company’s future growth.
TRANSACTION
- The Transaction values the combined company at an implied fully diluted pro forma enterprise value of approximately $4.3 billion, representing an 8.8x multiple of Core Scientific’s 2021 projected revenue of $493 million and a 21.4 x multiple of 2021 projected adjusted EBITDA of $203 million.
- The Company was adjusted EBITDA positive for the year ended December 31, 2020.
- The Transaction is expected to provide in excess of $300 million in net cash proceeds to Core Scientific at closing, after transaction expenses and assuming no redemptions of shares by XPDI’s existing public stockholders.
- Existing Core Scientific stockholders are retaining 100% of their equity in the combined company. Core Scientific stockholders (including former stockholders of Blockcap) will own approximately 89%, XPDI public stockholders will own approximately 8% and XPDI’s sponsor will own approximately 2% of the issued and outstanding shares of common stock, respectively, of the combined company at closing.
- The proceeds from the Transaction are expected to fund mining equipment purchases and infrastructure build-out as the Company expands its leadership position.
PIPE
- There is no PIPE for this transaction
SUPPORT AGREEMENT
XPDI entered into a Sponsor Agreement by and among XPDI, XPDI Sponsor LLC, the other holders of XPDI’s Class B common stock, and Core Scientific, whereby, among other things:
- 20% of the shares of Class B Common Stock held by the Class B Holders (the “SPAC Vesting Shares”) will be unvested at the Closing and will vest (and shall not be subject to forfeiture) upon the date on which the volume-weighted average price of the Class A Common Stock is greater than $12.50 per share for any 20 trading days within any 30 consecutive trading day period within five years of the Closing (the “Vesting Period”).
- Any SPAC Vesting Shares that have not vested by the end of the Vesting Period will be deemed to be transferred by the forfeiting holder to XPDI without any consideration and shall be cancelled by XPDI and cease to exist.
NOTABLE CONDITIONS TO CLOSING
- Expiration or termination of the waiting period under antitrust laws
- Receipt of approval for listing on the NASDAQ of the shares of Class A Common Stock to be issued in connection with the Business Combination.
NOTABLE CONDITIONS TO TERMINATION
- By either XPDI or Core Scientific if the Closing has not occurred on or before March 21, 2022
ADVISORS
- Barclays Capital Inc. is serving as financial and capital markets advisor to XPDI.
- XMS Capital Partners, LLC is serving as financial advisor to XPDI
- Kirkland & Ellis LLP is serving as legal advisors to XPDI.
- Evercore is serving as financial advisor to Core Scientific
- Cooley LLP is serving as legal advisors to Core Scientific.
MANAGEMENT & BOARD
Executive Officers
Patrick C. Eilers, 54
Chief Executive Officer and Director
Mr. Eilers is the founder and Managing Partner of EPTP, a private equity firm focused on the energy & power transition, in particular its impact on the electrical grid, with an expertise in (i) renewable energy, (ii) energy storage, technology, equipment & services, and (iii) transitional energy infrastructure. Mr. Eilers has over 20 years of investment experience focused on the energy & power transition. Prior to founding EPTP, Mr. Eilers was a Managing Director on the BlackRock Infrastructure Platform, where he also served as an Investment Committee member for BlackRock’s Global Renewable Power Fund, Global Energy & Power Infrastructure Fund, and Chaired the Energy & Power Private Equity Fund. Prior to joining BlackRock, he also worked at Madison Dearborn Partners overseeing the firm’s energy, power, and chemicals practices for 10 years. Mr. Eilers earned a Bachelor of Science in Biology and Mechanical Engineering from the University of Notre Dame and a Master of Business Administration from the Kellogg School of Management at Northwestern University.
James P. Nygaard, Jr., 46
Chief Financial Officer
Mr. Nygaard is a Managing Director of XMS Capital Partners, LLC and is responsible for leading M&A execution activities at the firm. With 25 years of investment banking experience, he has completed several strategic transactions, financings, and corporate finance advisory assignments for a diverse range of clients across a variety of industry sectors. Prior to joining XMS Capital at the end of 2007, Mr. Nygaard spent 12 years in the Investment Banking Division of Morgan Stanley where he assumed various roles within the corporate finance, M&A and administrative practices of the firm. While at Morgan Stanley, Mr. Nygaard led coverage and strategic execution efforts for a number of Midwest-based companies, including 3M, Anheuser-Busch, ConAgra Brands, Ford Motor Company, and General Mills. Mr. Nygaard graduated summa cum laude from the University of Illinois at Urbana-Champaign with a Bachelor of Arts in Economics, where he was valedictorian of his department and received Bronze Tablet Honors, the university’s highest academic distinction.
Benjamin W. Atkins, 34
Vice President
Mr. Atkins is currently the Chief Capital Officer and co-founder of HODL Ranch Mining Company where he focuses on business development and origination activities. Mr. Atkins co-founded Skybox Datacenters, and is a co-founder and partner of Rugen Street Capital, a holding company for the founders of Skybox Datacenters. Prior to joining HODL Ranch Mining Company, Mr. Atkins served as an equity research analyst at Chilton Capital Management in Houston, Texas as well as an investment analyst at Salient Partners in Houston, Texas. Mr. Atkins earned a Bachelor of Business Administration in Finance from Texas A&M University.
Jesse Peltan, 24
Vice President
Mr. Peltan is the Chief Technology Officer and co-founder of HODL Ranch Mining Company. Mr. Peltan also co-founded Autonomous with Mr. Powell and currently serves as the Chief Technology Officer, where he has designed and built multiple ASIC and GPU cryptocurrency mines. Mr. Peltan also leads technical research and development at HODL Ranch Mining Company and has developed solutions for operating cryptocurrency mines in various climates in Texas and developed demand side management strategies to capitalize on the growth in intermittent renewable energy in ERCOT. Prior to leaving his senior year to co-found Autonomous, Mr. Peltan attended the University of Kentucky, where he was a quadruple major in Mathematics, Economics, Philosophy and Environmental Sustainability. Mr. Peltan has been recognized by Forbes 30 under 30 in Energy for his work at HODL Ranch Mining Company.
Board of Directors
Theodore J. Brombach, 57
Chairman of the Board
Mr. Brombach is a founding partner of XMS Capital Partners, LLC and serves as the firm’s Co-Managing Partner. He is also the Chief Executive Officer of XA Investments LLC, an alternative asset management firm he co-founded. Mr. Brombach is the President and Chief Executive Officer and a Trustee of XAI Octagon Floating Rate & Alternative Income Term Trust (NYSE: XFLT), a closed end fund investing in alternative credit investments. He has over 30 years of investment banking experience in Chicago, New York and London. Prior to founding XMS Capital, Mr. Brombach was a Managing Director and co-head of Midwest Investment Banking at Morgan Stanley. At XMS Capital, he has led numerous M&A and capital raising transactions across a number of industry sectors. Mr. Brombach is a director of RiverWood Bank. Mr. Brombach earned a Bachelor of Arts from the University of Notre Dame and a Master of Business Administration from the Kellogg Graduate School of Management at Northwestern University.
Paul Dabbar, 53
Director
Mr. Dabbar is currently the Chief Executive Officer of Bohr Quantum Technologies, a quantum communications company, and has served in such role since 2021. Prior to Bohr Quantum, Mr. Dabbar served as Under Secretary for Science at the U.S. Department of Energy from 2017 to 2021, managing the operations of, and investing capital at the seventeen U.S. National Laboratories, conducting research and development in energy, technology and the sciences. Mr. Dabbar was previously a Managing Director in investment banking at J.P. Morgan Chase & Co., in energy and mergers & acquisitions from 1996 to 2017. Mr. Dabbar was also previously a nuclear submarine officer in the U.S. Navy. Mr. Dabbar earned a Bachelor of Science from the U.S. Naval Academy and an MBA from Columbia University.
Paul Gaynor, 55
Director
Mr. Gaynor is currently the Chief Executive Officer of Longroad Energy, a renewable energy company. Prior to co-founding Longroad Energy, Mr. Gaynor served as CEO of First Wind, which he founded in 2004. Mr. Gaynor has also held various roles within Singapore Power, PSG International, GE Capital, and GE Power Systems. Mr. Gaynor earned a Bachelor of Science in Mechanical Engineering from Worcester Polytechnic Institute and an MBA from University of Chicago.
Colleen Sullivan, 47
Director
Ms. Sullivan is Co-Founder and CEO of CMT Digital Holdings LLC and has been a partner with the broader CMT Group since 2013. Ms. Sullivan oversees CMT Digital’s trading, investments, and regulatory initiatives in the crypto assets/blockchain technology space. Ms. Sullivan is also a Co-Founder and Managing Member of Sullivan Wolf Kailus LLC, a boutique law firm based in Chicago that specializes in hedge fund, private equity, venture capital, digital assets, and other alternative investment products. Ms. Sullivan previously practiced law in the Investment Funds and Derivatives group at Sidley Austin LLP and, at age 25, co-founded a company called iOptions Group LLC, which developed hedging and monetization strategies for holders of employee stock options. Ms. Sullivan currently serves on the Board of Directors of Silvergate Bank and on the Advisory Board of the Chamber of Digital Commerce. Ms. Sullivan earned a Bachelor of Science in Accounting from the University of St. Francis and a Juris Doctorate from Depaul University School of Law.
Scott Widham, 63
Director
Mr. Widham brings over 30 years of broad-based management and operations experience in the telecommunications industry. Mr. Widham is currently President of Widham Capital, providing advisory services to strategic and financial institutions making investments in the telecom sector. Previously, he served as CEO of Alpheus Communications, Cobridge Communications, Broadwing Communications, and Capital Cable. Mr. Widham also served as EVP of Corecomm and was a Director at MTV Networks. Mr. Widham earned a B.B.A. from the University of Texas at Austin.