Background on the The9:

  • Internet company listed on the NASDAQ since 2004.
  • Shanghai-based online game operator.
  • Former operator and distributor of World of Warcraft.
  • Transitioning the business to Bitcoin mining while operating the gaming business.

The9 is best known for being the operator and distributor of World of Warcraft in China. In 2009, the company took a massive hit when Activision Blizzard announced that it had terminated its license agreement with The9 and chose a different provider. The stock price cut in half and in the proceeding earnings announcement, The9 reported a 32% drop in revenue and a loss of $12 million. The company still hasn’t financially recovered from its blowback as 2020 revenue was a measly $90,600. The9 now hopes to spark a revival by transitioning into Bitcoin mining.

In 2021, The9 aggressively forced its way into the mining scene by signing several purchase agreements with top mining manufacturers. It invested, acquired, and formed strategic partnerships with other miners and mining infrastructure firms.

The following sections provide a brief overview of The9’s aggressive expansion into mining:

February 2021:

  • Agreed to purchase 5,000 mining units from MicroBT within a year.
  • Completed two batches of 440 M32 and 482 M31S+ machines. The M31S+ machines were delivered in the same month, increasing The9’s Bitcoin hash rate to 40 PH/s.
  • Entered into purchase agreements with five Bitcoin mining manufacturers to purchase 26,007 machines producing a total hash rate of approximately 549 PH/s or 0.36% of the global Bitcoin hash rate.
  • Agreed to a $10 million cash purchase of Filecoin mining machines

March 2021:

  • Agreed to purchase 8,489 machines consisting of several brands including Whatsminer, Antminer, and AvalonMiner. The combined hash rate of these miners was estimated to be 156 PH/s.
  • Agreed to purchase 24,000 S19j Antminers from Bitmain that are expected to start arriving in November 2021.

April 2021:

  • Purchased 2,000 AvalonMiners with a total hash rate of 100PH/s.
  • Announced an agreement for 12,246 Bitcoin mining machines was complete.
  • Invested $4 million (CAD) in Skychain Technologies to construct and operate a 12 MW cryptocurrency mining facility in Canada. Skychain is a TSX-V listed company specializing in power, energy, and construction solutions for large-scale mining farms.

May 2021:

  • Singed a $5.7 million agreement to purchase Chia (XCH) mining machines and cloud service leasing. Chia claims to be a “green Bitcoin alternative”.

June 2021:

  • Agreed to acquire Montcrypto for $7.6 million (CAD), to build a carbon-neutral, 20 MW supply of electricity in Canada, with the capacity to operate more than 6,000 S19j Antminers.
  • Announced it had chosen Coinbase Custody to hold its mined coins. A batch of 200 Bitcoin was moved in cold storage with the custody provider.

July 2021:

  • Signed a hosting agreement with Russian company BitRiver to reserve 12 MW of electric capacity.

August 2021:

  • Established a joint partnership with KazDigital, a Kazakhstan-based mining firm, to build a 100 MW mining facility to be completed in the first quarter of 2022.
  • Signed a joint venture agreement with LGHSTR, a Kazakhstan-based mining firm, to build a 200 MW mining facility within two years.

November 2021:

  • Struck a deal with Compute North, an industry-leading, large-scale provider of cryptocurrency mining infrastructure, to deploy 10,000 S19j miners in the United States.

Based on their announcements, the miner has agreed to purchase a total of 75,748 mining machines. There’s no doubt, The9 is forcing its way into the Bitcoin and cryptocurrency mining arena.

The chart below illustrates how investors reacted to the aggressive acquisition of mining machines. The share price rocketed to $83 from $4 early in the year and then cannonballed to $12 as the year progressed. The culprit of the rapidly declining share price is likely the issuance of shares to fund The9’s ambitious transition. The company has issued more than 315 million shares since the beginning of the year. But the stock is still up an impressive 231% YTD, while Bitcoin is up 104%.

Apart from mining, the company invested in NFTs through its new platform, NFTSTAR, expected to launch on December 17th. NFTSTAR will allow users to buy and sell various NFTs across the sports, entertainment, art, and celebrities fields. Some notable partnerships include “NFL football star Christian McCaffrey, Portuguese football legend Luis Figo, Korean football star Son Heung-Min and two-time NBA MVP Giannis Antetokounmpo”.