Tech newsround – Merge and acquisitions

Crypto – The Merge pt. II

• Ethermine, the world’s biggest mining services provider for Ethereum miners will close its servers over the next 24 hours rendering $10bn of hardware useless which is now likely to end up on the second-hand market.
• While this is a big step forward for cryptocurrencies in their quest to become viable payment mechanisms (see here), it is likely to create a larger hardware overhang.
• It is estimated that there are around 1m Ethereum miners who have around $10bn of hardware between them, a large piece of which is going to be graphics cards.
• This is because crypto mining is much better suited to the kind of processors that are used for graphics and I suspect that there are around $3bn – $5bn worth of graphics cards that will now be looking for a new home.
• This is in addition to the significant increase in supply that resulted from the collapse in Bitcoin valuation which combined with increasing energy prices, rendered many miners uneconomical.
• Nvidia has already seen the impact of this on its gaming business in its last quarterly results (see here).
• This is more bad news for Nvidia and AMD, but this is a dent rather than a crater for Nvidia.
• This is because its graphics cores are already being used in many other applications and so after a couple of difficult gaming quarters, I expect this cloud will pass.

Twitter – Obvious approval

• Twitter shareholders have made the obvious move in approving Elon Musk’s takeover of Twitter but forcing him to complete the transaction will be quite another matter entirely.
• The transaction was approved in a short conference call in a demonstration of just what a good deal Mr Musk was offering.
• This is further demonstrated by the bad case of buyer’s remorse from which he is now suffering.
• This is leading to him pulling every manoeuvre that he can think of to try and get out of the commitment that he made.
• This is why he recently latched onto the testimony of Pieter Zatko who testified to congress on a national security issue.
• His testimony tends to support Mr Musk’s reason for abandoning the deal which is that Twitter has been less than truthful with regard to the fake and spam accounts that it has on its platform and its general level of data security.
• However, given that Mr Zatko was fired by Twitter in January, it is clear that he has an axe to grind with the company.
• Hence, I continue to think that the Delaware court will order Mr Musk to buy the company but that it will prove almost impossible to enforce (see here).
• Hence, I suspect that the deal will not go through and given what has happened to the rest of the technology sector, it is not hard to argue that Twitter should be trading at $17 – $20 per share.
• Hence, Twitter shareholders waiting for $54.20 per share are unlikely to realise that price and given the downside that still exists, are best selling out now as they are still getting a great deal for their shares.