Update: 500.com announced on February 1 a definitive agreement it entered to buy 5,900 bitcoin mining machines for a total of $8.5m. The delivery of all machines will take place in Q2 2021. The Chinese company additionally signed a framework agreement to purchase up to 10,000 bitcoin mining machines this year, depending on their availability and other conditions.

A foray into Bitcoin mining

Chinese online gambling company 500.com has entered into an agreement to acquire $14.4m worth of Bitcoin mining machines in its latest attempt to diversify into cryptocurrency.

In a Monday press release, the company announced the acquisition agreement with “certain non-US persons”. As part of the deal, the operator expects to issue a total of 11,882,860 Class A shares valued at $1.21 each. This corresponds to around $14.4m, based on the closing trading price prior to the date of the agreement.

The deal comprises a number of Bitcoin mining machine models, including the S17, T17, M20s, and S9. Subject to certain closing conditions, the operator expects to finalize the acquisition this quarter, and aims to begin making revenue from the machines in the first half of 2021.

Cryptocurrency future for the Chinese operator

500.com’s latest acquisition follows a new strategy of diversifying revenue streams through cryptocurrency – an approach it established last month. In a company statement, the company board proposed the exploration of “business opportunities in the blockchain and cryptocurrency industries.”

new strategy of diversifying revenue streams through cryptocurrency

As part of this strategy, the board appointed Xianfeng Yang as its new CEO, effective December 21. 500.com pointed to Yang’s “extensive experience in the cryptographic digital virtual currency industry” as a main reason for the appointment. The operator also said it would draw on the experience of its subsidiary Loto Interactive in the cryptocurrency sector.

At the same time as announcing Yang’s role, a new share subscription agreement was struck with Good Luck Information Technology Co. The Hong Kong-based company agreed to purchase 85,572,963 of 500.com’s newly issued Class A shares for $23m. The Chinese operator said US dollars or cryptocurrencies could be accepted in payment.

The operator’s financial troubles

500.com’s foray into cryptocurrency comes as the Chinese gambling operator struggles with falling gaming revenue. The company is yet to release figures for the full-year 2020. For the full-year 2019, operating losses almost doubled to RMB634.4m ($98.1m), while net loss reached RMB636.4m ($98.4m).

There are a number of reasons for the company’s rising losses and dwindling revenue. In 2015, Chinese authorities suspended its operations in several of the nation’s provinces, following the discovery that many provincial lottery operators were not reporting all sales. To counter its losses, 500.com purchased the parent company of Nordic-facing online gambling operator Multilotto.com.

the company failed to renew its license in the expected time frame

Multilotto too has struggled since the re-regulation of the Swedish market on January 1, 2019. At the beginning of 2020, its Swedish operations came to a complete stop after the company failed to renew its license in the expected time frame.

500.com resumed activities for the first time in mid-September last year after Multilotto successfully renewed its Swedish license. However, revenue still fell 37% year-on-year for the third quarter of 2020, to a total of RMB6.1m ($943,955). Swedish operations accounted for RMB3.3m ($510,361) of this total. The remaining RMB2.8m ($433,034) came from sports information services in China.