Riot reveals bid to buy Bitfarms, following CEO ouster

Riot Platforms is the largest shareholder of Bitfarms. But it now wants to acquire the rival company outright to become the largest publicly traded bitcoin miner.

Colorado-based Riot, which has mining operations in Texas, has offered to buy all outstanding shares of Bitfarms at $2.30 per share, the company said in a Tuesday news release.

The potential acquirer currently owns a 9.25% stake in Bitfarms.

If the transaction goes through, Bitfarms’ shareholders would own up to 17% of the combined company, Riot said.

Riot made the offer privately to the Bitfarms’ board of directors on April 22 — though the board denied the proposal “without engaging in substantive dialogue,” according to the company.

A committee of independent directors “carefully considered the proposal and determined it significantly undervalues the Company and its growth prospects,” Bitfarms said in a Wednesday statement.

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Riot did not respond to the committee after Bitfarms requested confidentiality and non-solicitation protections, Bitfarms added.

Canada-headquartered Bitfarms named co-founder Nicolas Bonta as the company’s interim president and CEO earlier this month as it continues its executive search. The company ousted Geoffrey Morphy from the CEO post after Morphy filed a statement of claim against Bitfarms in the Superior Court of Ontario.

Morphy is claiming $27 million worth of damages for alleged breach of contract and wrongful dismissal. Bitfarms said the claims are “without merit.”

Riot CEO Jason Les said in a statement that he is “deeply concerned” that Bonta and co-founder Emiliano Grodzki may not be acting in the best interest of all Bitfarms shareholders.

“The abrupt termination of the Bitfarms CEO without a transition plan in place at a critical period of execution for Bitfarms and the industry, as well as the allegations, if accurate, regarding the actions of certain members of the Bitfarms Board set out in the lawsuit filed by that recently terminated CEO, raise serious governance questions,” Les said.

After Bitfarms’ annual meeting on May 31, Riot hopes to initiate a special meeting of Bitfarms shareholders to add “well-qualified and independent directors” to the Bitfarms board.

Riot’s original offer presented to the Bitfarms board came just days after the Bitcoin halving — an event during which per-block rewards for mining bitcoin were cut from 6.25 BTC to 3.125 BTC. Industry watchers expected the occurrence to spur mergers and acquisitions activity.

Elliot Chun, a partner at crypto advisory firm Architect Partners, previously told Blockworks that there was “a much healthier buyer set” that is looking to expand.

Indeed, Riot had roughly $1.3 billion in combined cash and unencumbered bitcoin at the end of the first quarter. The company has said it intends to grow its self-mining hash rate capacity from 12.6 exahash per second (EH/s) on April 30 to 31 EH/s by the end of 2024 on the heels of machine purchases.

Bitfarms too is in the midst of a “transformative fleet upgrade,” revealing in November it had ordered 35,888 Bitmain T21 miners. The company also bought land in Yguazu, Paraguay — a region known for hydropower — in January for a planned 100 megawatt facility.

Riot executive Chairman Benjamin Yi said in a statement the transaction would create the largest publicly listed bitcoin miner globally — and one that is geographically diversified. The combined company would have up to 1.5 gigawatts of power capacity and 52 EH/s of self-mining capacity by the end of 2024.

“While we have long respected Bitfarms’ business and management team, we are confident that Bitfarms’ shareholders will agree that this proposal represents a significantly more attractive alternative for Bitfarms than its standalone trajectory.”

Updated May 29, 2024 at 3:56 pm ET: Added statement from Bitfarms.

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