Via SPAC Merger, Dynamix Is Becoming ‘The Ether Machine’

Summary The Ether Machine (ETHM) SPAC merger could create the largest public Ethereum holder, with up to 400,000 ETH on its balance sheet. Unlike most ETH Treasury plays, ETHM plans active DeFi participation, leveraging leadership from Consensys executives for higher potential upside. DYNX shares currently trade at a premium to cash value, making warrants more attractive if ETHM rallies post-merger, but both are a ‘hold’ for now. While the market has priced in much of the upside, I see potential for future exposure if valuations become more compelling after the merger closes. With the market continuing to reward publicly listed companies for pivoting to Digital Asset Treasury businesses, one of the latest examples comes via the proposed SPAC merger between Dynamix Corporation ( DYNX ) and The Ether Reserve, LLC. Upon completion of the deal, the combined entities will be known as ‘The Ether Machine’ and trade under the ticker ETHM. According to Strategic ETH Reserve – a website that tracks major holders of Ethereum ( ETH-USD ) – there are already no less than 11 publicly listed entities identifying as Ethereum Treasury organisations and ETHM would be among the top should the merger be approved. ETH Holdings ( strategicethreserve.xyz ) I’ve covered a few of them already for Seeking Alpha and don’t generally like the 2+ mNAV multiples that most of them are being given by the market: SharpLink Gaming: Another Overpriced Ethereum Wrapper Bitmine Immersion: Capitalizing On Renewed Crypto Enthusiasm, Likely To End Badly BTCS: The Rise Of The Ethereum Treasury Company? Bit Digital Makes A Massive Bet On Ethereum What most of these examples have in common is that they are companies that previously operated floundering digital asset mining or software businesses. Given the immense success Strategy ( MSTR )( STRF ) has had over the last several years in pivoting to a Bitcoin ( BTC-USD ) Treasury company amid that company’s own revenue growth woes, there is currently a ‘gold rush’ of sorts to raise capital in the public markets with the intention to buy cryptocurrencies. Though I don’t think I’ve made it a real mystery that I view most of this with cynicism, The Ether Machine might ultimately be worth a look for a variety of reasons. DYNX and Merger Details Balance Sheet (Dynamix Corp, 10-Q) Dynamix Corporation went public in late 2024 as a Special Purpose Acquisition Company. The company raised $166 million and holds its cash through a trust. At the end of March, there were 16,600,000 class A common shares outstanding and 14,285,000 warrants that currently trade under the ticker symbol ( DYNXW ). 8.3 million of those warrant shares are public, with the remaining 6 million privately placed. Since the DYNX shares would become ETHM shares upon merger completion, the DYNXW warrants are actually fairly interesting given their $11.50 conversion price. The warrants can be exercised 30 days after merger completion has taken place. So there is obviously a time component to playing the warrants that should be considered; especially because the deal isn’t expected to close until some time in Q4 of this year. But we’ve already seen DYNX trade as high as $15 per share in the days since this proposed merger was announced. At a $15 DYNX price, the warrants are worth $3.50. This is admittedly a hypothetical situation and might not happen. But from the July 23rd closing prices, DYNXW might be the better opportunity if traders/investors believe DYNX could get back to $15 per share. Common vs Warrants DYNX DYNXW 7/23 Close $11.15 $1.95 Value at $15 DYNX Price $15.00 $3.50 Potential Upside 34.5% 79.5% Source: Seeking Alpha, Analysts’s calculations Now the elephant in the room here is that the warrants have an intrinsic value of $0 at a $11.15 DYNX price. But even as overpriced as they are at $1.95, they still have more upside than DYNX if one believes DYNX will experience the same type of rally when it becomes ETHM that has been exhibited by every other ‘ETH Treasury’ company in the public market to this point. Regarding the actual amount of ETH held by the company today, there had been quite a bit committed to the post-merger company: $645 million in ETH – or roughly 170,000 – has been committed by former Consensys executive Andrew Keys. Funding on July 25th. Private placement investors agreed to contribute another $293.4 million in cash and nearly 150,000 ETH. Funding to take place following the business combination. At closing, the company plans to hold up 400,000 ETH on The Ether Machine balance sheet. This would make ETHM the largest public holder of ETH, assuming SharpLink Gaming ( SBET ) and Bitmine Immersion ( BMNR ) don’t exceed that number between now and then. Which, frankly, I would expect them both to do. Pro-forma capital sources (Dynamix Corporation) Assuming this all goes through as intended, ETHM would have a $1.7 billion equity valuation at close with 10% of ownership coming from the original DYNX shareholders. From where I sit, buying DYNX today at a significant premium to the $10 IPO price isn’t necessary because the DYNX shares still just represent cash rather than ETH. If the deal isn’t approved or somehow falls through, DYNX has no ETH exposure whatsoever. Ether Machine Goals Warrant dynamics aside, The Ether Machine might actually be one of the more interesting ways to play ETH in the public markets longer term due to the company’s apparent commitment to the ecosystem: Dynamix Corporation Post-merger CEO David Merin and Chairman Andrew Keys both worked at Consensys, a major Ethereum developer and builder of the Metamask wallet. What makes The Ether Machine so much more compelling than a spot ETF or even competing ETH Treasury companies that simply stake the ETH is the planned participation in DeFi. Given the company’s leadership and incentive alignment with the Ethereum ecosystem, The Ether Machine could function more like an active asset manager than as a simple digital asset holder. Of course, there is more risk with that approach, but there is higher upside as well. Closing Summary I’ll be watching how this merger plays out later this year. I see the immediate pullback in DYNX from $15 after the announcement as a sign that the market has a good sense for where the upside is in this merger at this point in time. Right now, The Ether Reserve LLC is where the money would be made should the price of ETH continue raising. DYNX is probably a buy at $10. I’m not as convinced at $12-15. However, if the shares of the common do move toward that mid-teen level, the warrants get very interesting. For me, both of these Dynamix tickers are a ‘hold’ at this point in time. But I wouldn’t rule out exposure to either down the line.

Source: Seeking Alpha