Riot Platforms has proposed a $950 million acquisition of Bitfarms, reflecting a 24% premium over Bitfarms’ average share price from the past month, as of May 24.
According to a Riot’s press release, Riot’s bid follows Bitfarms’ Board of Directors’ rejection of a private proposal.
The private offer was initially made on April 22 amid internal turbulence at Bitfarms, including a CEO dispute and subsequent lawsuit.
Creating the Largest Public Bitcoin Miner
The acquisition aims to establish the largest publicly listed Bitcoin mining company by merging Riot’s resources with Bitfarms’ operations. Riot’s Executive Chairman, Benjamin Yi, stated:
“A combination of Bitfarms and Riot would create the premier and largest publicly listed Bitcoin miner globally, with geographically diversified operations well-positioned for long-term growth.”
Riot, which already holds a 9.25% stake in Bitfarms, proposes a deal involving cash and stock, giving Bitfarms shareholders about 17% ownership of the new entity.
The merger would create a Bitcoin mining giant with current power capacity of 1 GW and 19.6 EH/s mining capacity, potentially growing to 1.5 GW and 52 EH/s by year’s end.
Citi is Riot’s financial advisor, with legal advice from Paul, Weiss, Rifkind, Wharton & Garrison LLP, and Davies Ward Phillips & Vineberg LLP.
Bitfarms has not yet responded to Riot’s latest proposal.
CEO Dispute
Riot’s announcement comes amidst a significant turbulence at Bitfarms related to a legal battle with former CEO Geoffrey Morphy, who has filed a lawsuit against the company for wrongful dismissal.
Bitfarms had announced that Morphy would resign from his role later this year once a replacement was found. However, Morphy filed a $27 million lawsuit against the company on May 10, seeking compensation in damages and including allegations against certain members of the Bitfarms Board of Directors.
Following the lawsuit, Morphy’s role was terminated immediately on May 13. Bitfarms co-founder and Chairman Nicolas Bonta was appointed as the interim CEO. The company also claims Morphy’s allegations are unfounded and plans a vigorous defence.
Governance Concerns
Morphy’s legal actions have raised significant governance issues within Bitfarms, particularly amid the pressures from the recent Bitcoin halving.
Riot executives, including CEO Jason Les, expressed concerns over Bitfarms’ governance, particularly the actions of co-founders Bonta and Emiliano Grodzki.
Les highlighted on social media post:
“We are deeply concerned that the founders on the Bitfarms Board may not be acting in the best interests of all Bitfarms shareholders. The abrupt termination of the Bitfarms CEO raises serious governance questions.”
Riot plans to call a special shareholders meeting after Bitfarms’ Annual General and Special Meeting on May 31, 2024, to propose new independent directors for Bitfarms’ Board.