Key takeaways:
- Riot Platforms declared its intention to pay US$2.30 per share to buy Bitfarms.
- The transaction consists of cash and Riot common stock, which could give Bitfarms’ shareholders a possible 17% stake in the combined business.
Riot Platforms declared its intention to pay US$2.30 per share to buy Bitfarms. By becoming the biggest Bitcoin miner in the world, which is publicly traded, this transaction would provide significant value to shareholders.
Riot intends to call a special meeting of Bitfarms’ shareholders in order to add more independent directors to the company’s board. Riot now has the largest interest in Bitfarms, having purchased a 9.25% share.
As of May 24, 2024, Bitfarms’ one-month volume-weighted average share price was $24% more than the proposal, and as of April 19, 2024, it was 20% higher.
The transaction consists of cash and Riot common stock, which could give Bitfarms’ shareholders a possible 17% stake in the combined business. The Bitfarms Board apparently received this idea in private on April 22 but rejected it without a meaningful discussion.
According to Riot, merging the businesses would result in major strategic and financial advantages, such as the creation of a vertically integrated Bitcoin mining business with a current power capacity of roughly 1 GW and a self-mining capacity of 19.6 EH/s, which would increase to 1.5 GW and 52 EH/s by the end of the year. At this scale, the United Company would be the biggest Bitcoin mining corporation in the world.
With 15 sites spread across the US, Canada, Paraguay, and Argentina, the merger would improve geographic diversification and provide up to 2.2 GW of electricity capacity when fully constructed. Riot’s strong financial standing, which includes more than $700 million in cash and nothing in the way of corporate debt, would help Bitfarms achieve its expansion goals and facilitate entry to public equity markets.
Executive Chairman of Riot, Benjamin Yi, expressed displeasure with Bitfarms’ prompt rejection of the proposal but also highlighted the strategic match and development possibilities. CEO Jason Les expressed worries about Bitfarms’ governance, pointing to the company’s CEO’s sudden resignation and associated claims as alarming indicators. Jason stated:
“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’s Board of Directors unanimously approved the plan, which is subject to customary circumstances and is not legally obligatory.
Citi serves as Riot’s financial advisor, and Davies Ward Phillips & Vineberg LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP serve as its legal counsel. Riot says that it is still fully committed to going forward with this transaction, with the goal of becoming a top Bitcoin mining business with improved financial and operational skills.
