Fortitude Mining, a Zcash miner owned by Digital Currency Group, and HeartSciences Inc., a small-cap medical technology company trading on the Nasdaq, announced Tuesday they have entered into a definitive merger agreement. Fortitude CEO Andrea Childs said the business combination aims to provide flexibility and access to capital to accelerate the company's core strategies, primarily its Zcash mining platform. The announcement comes after Zcash plunged more than 60% earlier this month following disclosure of a counterfeiting vulnerability, though the token remains up nearly 900% over the past 12 months.
HeartSciences Stock Rises 55% Following Merger Announcement
HeartSciences shares rose about 60% in early trading on Tuesday and closed at $2.70 per share, an increase of about 55%. Fortitude and HeartSciences said they have entered into a definitive merger agreement to combine the two companies. The two companies hope to close the business combination in the second half of this year.
Digital Currency Group founder and CEO Barry Silbert said Tuesday, "We believe Zcash represents one of the most compelling opportunities in digital assets."
DCG to Own 95% of Merged Company
DCG will own about 95% of the shares in the new company, Childs said. Fortitude CEO Andrea Childs told The Block, "Going public, we expect it's going to provide us with the flexibility and access to capital to really accelerate our core strategies, which is our venture mining platform, and again, primarily today that's Zcash. And then continue to pursue high return opportunities on the power portfolio side as well."
Fortitude Distinguishes Strategy from Digital Asset Treasury Companies
Childs stressed that Fortitude's strategy differs from the digital asset treasury companies that emerged during the recent boom. "We are not a digital asset treasury company for several reasons. One, we are an operating company, so we have been purchasing machines and mining Zcash specifically since 2019," Childs said, adding that Fortitude does not currently hold a significant amount of ZEC.
Childs said Fortitude's strategy could evolve in the future. "We may make the decision to hold more Zcash on the balance sheet such that we don't have to fund the business by liquidating Zcash," she added.
Childs said the business combination has nothing to do with business synergies; it's about funding future growth.
Zcash Plunged 60% Earlier This Month After Vulnerability Disclosure
Zcash is still up nearly 900% over the past 12 months. The token plunged more than 60% earlier this month after disclosure of a counterfeiting vulnerability sparked a selloff. ZEC later recovered some of its losses after Zcash Open Development Lab implemented a two-step emergency update.
ZEC was changing hands at $415.83 as of 3:42 p.m. ET, down about 7% on the day, according to The Block Price Page. Zcash's current market cap sits at about $7 billion versus Bitcoin's $1.25 trillion.
Fortitude Targets Zcash Market Cap at 10% of Bitcoin
Childs remains optimistic about Zcash's long-term potential. "We believe that Zcash has the ability to be roughly 10% of the total cap of Bitcoin," she said.
Silbert told The Block in February, "The bet we're making is 5% to 10% of Bitcoin over the next few years, is going to find its way into privacy-focused cryptocurrencies."
FAQ
What did Fortitude Mining and HeartSciences announce on Tuesday?
Fortitude Mining and HeartSciences announced on Tuesday they have entered into a definitive merger agreement to combine the two companies. The two companies hope to close the business combination in the second half of this year.
How much of the merged company will DCG own?
DCG will own about 95% of the shares in the new company, according to Fortitude CEO Andrea Childs.
What happened to Zcash earlier this month?
Zcash plunged more than 60% earlier this month after disclosure of a counterfeiting vulnerability sparked a selloff. ZEC later recovered some of its losses after Zcash Open Development Lab implemented a two-step emergency update.
