Z Squared's Paradox deal is a $25 million option on power

Z Squared has signed a definitive agreement to take full ownership of Paradox Data, converting a planned $5 million cash purchase of a 51 percent stake into a takeover financed entirely with convertible preferred stock and a $20 million earnout tied to power and customer milestones. Data Center Dynamics first reported the revised terms, which extend an agreement announced in June. At closing, Z Squared will issue $5 million of Series A convertible preferred stock, while Paradox and an affiliated company stand to earn another $20 million in preferred stock if the Union County, Arkansas campus clears four development milestones.

The first $5 million tranche releases when AI compute capacity is initially energized at the existing site, or when Z Squared directs the seller to vacate the current building; the remaining $15 million arrives in three $5 million blocks at 50MW, 100MW and 150MW of campus capacity. At each threshold, $2.5 million is paid once Z Squared receives a binding request for service from an AI customer, and another $2.5 million once that capacity is energized. Beyond the closing stock, the seller collects nothing for the physical plant until the site produces something a customer has actually asked for.

CEO David Halabu told DCD that 80 percent of the potential consideration is earned only if the milestones are met. The arithmetic is clean: the $20 million earnout is 80 percent of the $25 million maximum price, and the only sure payment is the $5 million preferred at close. No cash changes hands at closing and no debt is taken on; the balance sheet is not funding construction, the seller's patience is.

The milestone schedule reads less like a financial earnout than a commissioning plan, because power is the gate at every step. The site at 713 Industrial Road currently holds an interruptible service agreement with Entergy Arkansas covering up to 8MW — enough to run mining rigs, nowhere near the 150MW of AI and high-performance computing capacity Z Squared has outlined for the 170-acre campus. Paradox also holds a contract on adjacent land, and Z Squared plans to combine utility power with on-site generation to reach the target.

Computing hardware is a commodity; a developer can always source more GPUs and more immersion tanks. Interconnection capacity and signed offtake are the real scarcities, and they are exactly what the earnout measures. Power is now the binding constraint on digital infrastructure, and Z Squared has written a contract that prices the constraint directly: the seller earns nothing beyond the initial $5 million unless the campus clears the grid gate and the customer gate. For a speculative data center, that is the honest structure.

There is a governance wrinkle. Z Squared's chief technology officer, Jeffery Harris, holds a 20 percent indirect interest in Paradox Infrastructure, the seller, according to an SEC filing cited by DCD, which places a member of Z Squared's executive team on both sides of the table. The reporting does not describe any special committee or fairness opinion, and it does not say how the related-party interest will be handled. Those are gaps in the public record, not accusations.

Z Squared comes to this deal as a miner, not a landlord. It operates cryptomining equipment across North Carolina, South Carolina and Iowa, historically dedicated to Dogecoin and Litecoin, and is expanding into power generation and AI/HPC development. The company has engaged A2 Advisors, a digital infrastructure consultancy, to handle development planning, project delivery, vendor selection, leasing and capital strategy — a sign it intends to act as a developer rather than a passive landholder.

Price the deal per megawatt and the shape of it becomes clear: the maximum $25 million consideration against a planned 150MW campus works out to about $167,000 per MW of capacity. That is a fraction of the capital required to build out the site, and it is not a mark on the land; it is the price of the risk that no customer ever signs. The earnout converts that risk into a payment schedule, so the seller is paid as the project becomes real.

The transaction remains subject to closing conditions, including the transfer of the property and associated assets to Paradox Data, and the parties expect to close within 30 days, with an outside date of September 30 that can be extended to December 31. The timetable says the deal is not waiting on financing; it is waiting on title. Once the property transfers, the first milestone becomes live: either Z Squared energizes AI compute in the existing building, or it tells the seller to leave. The market will be watching which of those happens first, because it will signal whether the company plans to run the site as-is or tear it down for the 150MW plan.

The $5 million preferred at close is the entry ticket; the $20 million in milestones is the payment for interconnection and offtake, and Z Squared has found a way to buy a data center without stretching its balance sheet. For private capital circling speculative AI campuses, the deal prices the asset as a series of gates and lets the seller share the risk until those gates open. The outside date of September 30 is the first test of whether the paper holds.