In high school, Gary Vecchiarelli received day-old copies of Investor’s Business Daily from a business teacher. Stock prices still appeared in fractions, and the teacher told him that he would know he had made it when he rang the bell on Wall Street.
Vecchiarelli tells us that the remark stayed with him for decades. He later rang the Nasdaq bell—an experience made more meaningful because his family knew the story. Long before that moment, however, he had begun ordering boxes of annual reports and reading financial statements he did not yet fully understand. He was drawn to CFOs who carried financial responsibility while dealing with Wall Street.
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That early interest eventually became a career defined by complex businesses and difficult financing choices. At CleanSpark, Vecchiarelli recalls confronting one such decision during a Bitcoin bear market. Debt was prohibitively expensive, and an at-the-market equity program was effectively the company’s only source of growth capital.
According to Vecchiarelli, CleanSpark faced an opportunity that required issuing shares at approximately $2.50. The decision was painful, but the capital funded land and power that the company now expects to convert into billions of dollars of shareholder value.
The experience gave Vecchiarelli a lasting appreciation for “optionality.” He tells us that CleanSpark can now consider high-yield debt, convertible securities, equity, and borrowing against its Bitcoin holdings. That range matters because, as he puts it, markets can be “real fickle.”
For Vecchiarelli, strategic finance is not simply raising and spending money. It means connecting execution, valuation, and capital so that today’s difficult decision creates more choices tomorrow.
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CFOTL: Tell us about CleanSpark. What type of business caught your attention? What kind of opportunity got on your radar and made you say, “Yes, I want to be part of this”?
Vecchiarelli: CleanSpark originally was an energy company. They had microgrids and solar arrays, and it was basically local distribution of power. A year before I joined, they got into the Bitcoin mining business when the co-founders went to consult on an energy deal. A Bitcoin miner wanted to reduce its power consumption and increase its margin.
The co-founders walked away saying, “We should buy this and get into this business,” because they’re energy guys. It’s a whole lot easier for energy guys to learn Bitcoin than for Bitcoin guys to learn energy. They were operating Bitcoin mines, and Bitcoin was really exploding at the time.
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When I did the interview, believe it or not, because I was well networked primarily in the small-cap and microcap area, I had actually talked to a few of their competitors earlier. But I was so loyal to Imatrex at the time that I was like, “No, no, no. I can’t do it.”
But now I took a fresh look at it, and CleanSpark just happened to be in the backyard here in Las Vegas. Las Vegas is a small community. They knew my reputation. We had a conversation, and we just hit it off. Maybe it was a little bold, but I looked the CEO in the face during the first interview and said, “Why are you even in this microgrid business? It’s low margin, has high working-capital needs, and you have this huge-margin business over here in Bitcoin mining. It doesn’t make sense.”
He said, “Yeah, you’re right. We should exit it.” They brought me on board, and I helped them clean up some of the challenges they had. I ended up being a cleanup master, I think, in my post-public-accounting world because it seems like everywhere I went had accounting issues, finance issues, or process and systems issues. I had to take care of that first. Ultimately, within a year, I helped them exit the microgrid business and really double down on Bitcoin mining.
We went out and acquired a large amount of land and power. This ends up being a little serendipitous because, where we sit today, the company actually announced a transformative transaction just last week in which we’re now getting into AI data centers. Bitcoin mines are essentially very rudimentary data centers. AI data centers are just a completely different world. There’s a whole lot more complexity and a much more technical aspect to them.
At the end of the day, as fiduciaries, we saw that Bitcoin mining economics were extremely tough, and we weren’t getting the multiple our shareholders wanted. The best way to monetize that power in megawatts was to move toward data centers. We saw some of our peers doing that, and their multiples and market caps had exploded.
We signed a $6.6 billion deal last week with a high-investment-grade global technology company whose name you would probably recognize, but unfortunately, we can’t disclose it. It’s a 20-year triple-net lease for a data center. We’re going to take one of our largest Bitcoin mines, which is currently energized, and build a data center next to it that’s going to produce over $300 million a year of NOI at nearly a 100% margin, going directly to the bottom line.
When I joined, the market cap of this company was $400 million. This is a monumental event for the company. It took a lot of work to get to this point, and it’s not going to be the last one. We have a lot of land and power, which has made us very attractive during this AI boom. I have CNBC on TV all day, and I can’t count how many times they’re talking about power and data centers and how front and center this is.
It’s so important because if you don’t have land and power, you can’t power the chips. If you can’t power the chips, no one can use AI in their businesses to move those businesses forward. This company is really well positioned, all because of Bitcoin mining.
I wouldn’t say we’re doing a pivot. We’re really growing into data centers, and that’s where we’re going to allocate most of our capital. I’m really excited that I’ve seen this evolution of the company. We’re now a $4 billion market-cap company, which is 10 times what it was when I joined. I still think we’re significantly undervalued, so we have a whole lot more room.
CFOTL: Given the amount of money being invested—or that this is going to require—how do you decide how much and where to invest next?
Vecchiarelli: That’s a great question. To give you an idea of the scale here, when we’re building infrastructure, it’s about $10 million to $12 million per megawatt. This deal we just signed is for 175 megawatts of what they call critical IT. It’s a 250-megawatt site. There are 250 megawatts being energized and provided to the site, but there are 175 megawatts of chips that are going to be delivered.
The difference between 250 and 175—75 megawatts—is the amount of power that goes toward cooling. Because these chips have so much power running through them, they produce heat as a byproduct. You need to be able to cool them, particularly when it’s 100 degrees outside. This location is in South Georgia, and it can get really hot during the summertime. You have to fire up the HVAC systems and coolers to make sure the chips don’t melt, basically.
You have 175 megawatts that are going to cost $10 million to $12 million per megawatt. That’s about a $2 billion build just for the infrastructure. What’s crazy is that the chips and equipment our tenants and the hyperscalers put in there cost three times that amount. It’s more than $30 million per megawatt in addition to the infrastructure we’re building.
We don’t take on the $30 million number. We take on the $10 million to $12 million number. But that means we have to go out and raise $2 billion as a $3 billion or $4 billion market-cap company. Right now, the market is debt financing. This is essentially Real Estate 101. It’s just big numbers and a lot of technical complexity in the actual build.
For us, it’s about making sure that we take advantage of the capital markets, strike the right balance between debt and equity, and hit our targeted internal rates of return. Right now, we’re able to get 90% to 95% loan-to-cost. That means that, of the $2 billion, we can most likely borrow most of it. Historically, it hasn’t been that high. It has been more like 75% to 85%.
If there’s one rule I’ve learned as CFO, it’s that if the money is there, take it, because the market can be fickle and it might not be there the next day. The high-yield market and the bond market are very attractive right now, and that’s one of the areas we’re going to end up tapping.
Capital allocation is super important. How you determine which instruments to use to finance your growth initiatives is super important. At the end of the day—and this is something I learned at Galaxy Gaming—we were in an illiquid environment where the CEO owned 60%. He was very stingy with the equity. As much as I said, “No, no, you have to get equity out and do a deal,” I get it now. You see the light as a CFO on how important it is to control dilution because it’s too easy to go out, raise equity, and take that capital.
Sure, we can take that capital, deploy it, and earn a healthy return on it. But equity is typically going to be your most expensive cost of capital, particularly if you believe you’re undervalued. My job as CFO right now is to make sure that we’re controlling that dilutive strategy as much as possible.
That’s why we’re leaning more toward debt, because the equity is not properly valued. If I have the choice between taking paper at 6.5% or 7% versus equity where my cost of capital could be somewhere in the twenties, it’s a no-brainer. That’s something we have to keep in mind when playing with the toggles on capital allocation.
CleanSpark | www.cleanspark.com | Las Vegas, NV