Cango secures big cash infusion in accelerated pivot to AI distributed computing

The company said that two of its directors will purchase an additional $65 million worth of its stock, a week after it sold more than half of its bitcoin holdings

Key Takeaways:

• Cango announced that two of its directors have agreed buy $65 million worth of its stock to help finance its accelerating move into distributed computing
• The company has been lowering its bitcoin mining activity amid a rapid decline in prices for the cryptocurrency

By Doug Young

Cango Inc. (CANG.US) received an important vote of confidence from two key backers on Thursday with its announcement of a major new investment, a week after it sold more than half of its bitcoin holdings and accelerated its move into computing management. The $65 million new investment, alongside an additional $10.5 million infusion from its largest stakeholder, will provide valuable capital for the company as it diversifies into distributed computing for AI clients to lessen its reliance on the volatile bitcoin market.

Cango largely abandoned its original business as a Chinese car trader over a year ago, and initially moved aggressively into bitcoin mining. In a campaign to diversify its business, the company announced plans last year for another move into high-performance distributed computing. It has now begun to accelerate that move, including the establishment of a new, U.S.-based company headed by an industry veteran who is already building up a team in the state of Texas, according to an announcement last week.

Cango originally adopted a “mine and hold” strategy for its bitcoin mining business, but abruptly shifted course last week with the sale of more than half of its holdings as the cryptocurrency plunged in value. It raised about $305 million through the sale of 4,451 bitcoins over the weekend of Feb. 7-8, compared with 7,474.6 in its treasury at the end of January, saying it would use the proceeds to repay a bitcoin-collateralized loan and strengthen its balance sheet.

Now, the company is further shoring up its finances with the latest fundraising from its non-executive Chairman Jin Xin, as well as board member Chang-Wei Chiu, who is chief investment officer of Antalpha Ventures, a Singaporean firm tied to Enduring Wealth Capital Ltd., Cango’s largest shareholder.

Under the newly announced investment, Jin will purchase 19.3 million of Cango’s Class A ordinary shares for $25.4 million through his company, Armada Network Ltd., according to the Thursday announcement. The investment will raise his stake to 4.7% of Cango’s shares and 2.6% of its voting power. Concurrently, Chiu will purchase about 30 million of Cango’s Class A shares for $39.6 million through his company, Fortune Peak Ltd. That purchase will boost his Cango stake to 12% of its outstanding shares and 6.7% of its voting rights.

At the same time, Cango announced the closing of a previously announced $10.5 million share sale that will boost Enduring Wealth Capital’s stake in the company to 4.71% from a previous 2.81%. But more importantly, the purchase involving Class B shares with super voting rights will give Enduring Wealth Capital 49.7% of Cango’s voting rights, just shy of a 50% majority and assuring its ability to control the company.

“The company intends to use the proceeds from the Class B investment and the proposed Class A investments to support its expansion into AI and computing infrastructure, while further strengthening its balance sheet,” Cango said.

Stock volatility

Cango’s stock initially soared in the months after announcing its move into bitcoin mining in November 2024. But since then it has given back all the gains, including an 18% decline over the last week, to trade roughly where it was before the shift from its Chinese car trading business. The company has been navigating a volatile bitcoin landscape where prices have fallen from a peak of around $124,000 per coin last October, to a trough of about $60,000 last week. Cango’s announced fundraising from its bitcoin sales implies it sold down its holdings at an average price of $68,524 per bitcoin. After the sale, it still held 3,645 bitcoins last week, according to a report in Coinbase, citing data from BitcoinTreasuries.

Even before the bitcoin volatility, Cango previously announced plans to complement its mining operation, with a current 50 EH/s of capacity, with the development of a related high-performance computing (HPC) business for AI users. Both bitcoin mining and HPC require very high levels of computing power and, consequently, are huge power consumers.

Cango plans to leverage its growing expertise in managing such complex operations at its mining facilities to offer similar services to other customers with similar needs. The biggest emerging group in that area is the growing number of companies using AI.

In its announcement last week, Cango outlined a three-stage plan to accelerate its move into high-performance computing, starting with a hybrid approach utilizing its leased space in mining centers on four continents as well as a facility it purchased in the U.S. state of Georgia. The company plans to deploy AI computing nodes across its more than 40 globally accessed sites to provide inference computing capacity to small and medium-sized businesses.

As part of the distributed computing initiative, Cango last week announced the establishment of EcoHash Technology, a wholly owned unit based in the U.S. city of Dallas, which is already assembling a team under the leadership of Jack Jin, a former senior operations executive at online meeting giant Zoom Communications. The company says the “plug and play” model it is developing has already completed feasibility verification through various demonstration projects, enabling the rapid deployment of AI edge computing nodes in traditional mining environments without large-scale infrastructure overhauls.

Over the medium term, Cango plans to develop and deploy a proprietary software platform to manage and integrate its distributed computing capacity. And over the long term, it plans to scale up its model to become a “mature global AI infrastructure platform.”

Cango says it is committed to continuing its bitcoin mining operation, though it has been scaling that back as mining costs rise above the latest bitcoin prices. Its monthly reports show the company scaled back the utilization rate of its mining capacity to 37.02 EH/s in January from 43.36 EH/s in December. Its average all-in cost for mining each bitcoin totaled $99,383 in last year’s third quarter, though the cost was a lower $81,072 after excluding amortization costs related to declining value of its mining machines. Still, both figures are well above current bitcoin prices, which now stand at around $65,000.

Original Article: https://thebambooworks.com/cango-secures-big-cash-infusion-in-accelerated-pivot-to-ai-distributed-computing/