Colorado-based Riot Platforms has disclosed a proposal it made to acquire fellow Bitcoin mining company, Toronto-based Bitfarms, for $950 million USD.
According to a statement today, Riot proposed to acquire all outstanding shares of Toronto-based Bitfarms for $2.30 USD per common share, which it said in a statement represents a 24 percent premium to Bitfarms’ share price on May 24.
Riot CEO Jason Les stated that the dismissal of Bitfarms’ CEO and allegations in the former CEO’s lawsuit “raise serious governance questions.”
The proposal, initially submitted April 22, was rejected by Bitfarms. In its statement today, Riot said it is concerned over the recent actions of Bitfarms’ founders as well as allegations made in a lawsuit filed by Bitfarms’ recently ousted CEO.
Riot reiterated its proposal today and said it plans to hold a special meeting aimed at bringing “needed change” to Bitfarms’ board.
Founded in 2017, Bitfarms owns and operates Bitcoin mining farms and provides computing power to cryptocurrency networks. The company trades on the Toronto Stock Exchange and Nasdaq under the symbol “BITF.”
In March, Bitfarms announced its then-CEO, president, and director L. Geoffrey Morphy would be departing, but would continue to lead Bitfarms as the company conducted a search for his replacement. Morphy had served in the role of CEO since 2022, prior to which he served as president and COO.
On May 11, Morphy reportedly filed a $27-million lawsuit against Bitfarms in the Superior Court of Ontario, claiming breach of contract, wrongful dismissal, and aggravated and punitive damages. On May 13, Bitfarms announced that Morphy had been terminated effective immediately, and co-founder and chairman Nicolas Bonta would serve as interim president and CEO.
Riot initially delivered its takeover proposal to Bitfarms privately on April 22, which Bitfarms’ board rejected “without engaging in substantive dialogue,” according to Riot. The US firm said that quick rejection, as well as allegations raised in Morphy’s lawsuit, compelled it to disclose its proposal to shareholders.
Riot said today it has accumulated a 9.25 percent equity stake in Bitfarms, claiming to be the largest shareholder in the company.
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“We are deeply concerned that the founders on the Bitfarms board—Nicolas Bonta and Emiliano Grodzki—may not be acting in the best interests of all Bitfarms shareholders,” Riot CEO Jason Les said.
“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 added.
Riot also laid out its strategic rationale for acquiring Bitfarms, claiming the combined company would be the largest Bitcoin miner globally. Riot also said Bitfarms would benefit from Riot’s “strong financial profile,” noting it has more than $700 million USD in cash on hand and 8,872 Bitcoin as of April 30, which it said were both roughly 10 times greater than that held by Bitfarms.
Riot said it plans to request a shareholders’ meeting to discuss appointing new independent directors after Bitfarms’ annual meeting on May 31.
The disclosure comes weeks after Bitfarms reported its lowest monthly earnings in over two years, following the fourth Bitcoin halving. Bitfarms traded at $2.22 USD on the Nasdaq at press time, up almost 10 percent compared to its price at the start of the trading day.
On May 29, Bitfarms released its own statement addressing the disclosure of Riot’s acquisition proposal. In it, Bitfarms said a special committee of its board “carefully considered” Riot’s proposal when it was received in April, and determined that “It significantly undervalues the company and its growth prospects.”
Bitfarms said it has received additional expressions of interest, adding that its special committee is reviewing “strategic alternatives to ensure it achieves maximum shareholder value,” including a merger or similar transaction, a sale of the company, or a continuation of its current business plan.
The company also noted that its search for a permanent CEO is underway, and believes that continuing with its current growth plan will maximize shareholder value.
UPDATE (29/05/2024): This story has been updated to include new information regarding Bitfarms’ response to Riot’s proposal disclosure.
UPDATE (19/06/2024): Last week, Riot Platforms announced it had purchased an additional 1,432,063 shares of Bitfarms, raising Riot’s stake in Bitfarms to 14 percent. This development comes amidst a series of statements from both companies, each denouncing the other.
On June 12, Riot issued a statement criticizing Bitfarms’ recent plans to block a takeover using a ‘poison pill’ strategy. According to Reuters, this approach entails Bitfarms issuing new shares to dilute an entity’s stake if it accumulates more than 15 percent of Bitfarms’ shares between June 20 and September 10.
“We have attempted to privately engage with the Bitfarms Board and recently sent two letters urging constructive collaboration with us around the addition of at least two new directors who are fully independent of Bitfarms and Riot,” Riot said in its statement. “Instead of engaging with us privately and in good faith, Bitfarms has responded by implementing an off-market Poison Pill with a trigger well below the customary 20 percent threshold.”
Bitfarms released its own statement on June 12, asserting that it has “welcomed” Riot’s involvement in its strategic alternatives review process but claimed Riot has “not acted in good faith.”
“It is clear that Riot’s interests are not aligned with those of Bitfarms’ shareholders, and instead of participating in the special committee’s process in good faith, Riot is attacking Bitfarms’ board and corporate governance in an effort to push its low-ball bid and disrupt the strategic alternatives review process,” Bitfarms’ statement read.
Feature image courtesy of Dmitry Demidko via Unsplash.