Riot Platforms Proposes Acquisition of Bitfarms Amidst Management Transition and Legal Drama
Summary:
Riot Platforms, a Bitcoin miner, has proposed a purchase offer for Bitfarms, considerably above its current stock price. Bitfarms, currently in a transitional phase seeking a new CEO, initially rejected the offer. On accepting the deal, Bitfarms' shareholders would own about 17% of the merged establishment. Riot argued that joining forces would result in a financially robust company with expansive growth prospects due to an experienced management team. Meanwhile, Bitfarms' ex-CEO has filed a $27 million lawsuit against the company citing wrongful dismissal, which led to co-founder Nicolas Bonta replacing him. Riot voiced concerns about current Bitfarms' directors acting in all shareholders' best interests and intends to propose new, independent directors to the board.
Bitcoin mining company, Riot Platforms, has proposed an acquisition deal for Bitfarms, offering a substantial premium above its current stock value. Initially presented to Bitfarms' Canadian board on April 22, the proposal has only been made public after its initial rejection. Riot already possesses significant ownership in Bitfarms, holding a 9.25% of equity in the company. The offer comprises of cash plus common shares, estimated to an equity worth approximately $950 million, proposing a 24% increment as compared to Bitfarms' weight-adjusted average stock value as measured on May 24, 2024. Should the deal go through, Bitfarms investors would claim a 17% stake in the resultant organization. Riot stated that this merger would present existing Bitfarms shareholders with prospects for future value through participation in a financially more steady business, steered by a seasoned management team.
While this development unfolds, Bitfarms is concurrently on the lookout for a new CEO. Its quest was made public on March 25 through a public release, wherein the outgoing CEO Geoffrey Morphy expressed optimism for the future team achieving their 2024 goals. Bitfarms originally planned to retain Morphy as they looked for his successor. However, Morphy filed a $27 million lawsuit against the company on May 10, citing breach of contract and wrongful dismissal, leading to his dismissal three days later. Following Morphy's termination, co-founder Nicolas Bonta was assigned as his replacement.
In its statement, Riot noted that the lawsuit's claims, if substantiated, cast doubt on whether certain directors considered all shareholders' best interests. The bereaved directors being referred to here were Bonta and Emiliano Grodzki, fellow co-founder. Riot has expressed that it will call for a dedicated shareholder meeting following Bitfarms' Annual General Meeting on May 31 for the purpose of adding new, capable and independent directors to Bitfarms' board.
Bitfarms' displayed subpar financial performance in 2023, following its hefty technological update in anticipation of the Bitcoin halving. Despite anticipations for improved performance post-halving, Bitfarms' earnings for April fell by 29% compared to the previous year. On the other hand, Riot reported a 131% uptick in net income for the first quarter of 2024, totalling to $211 million, but it has since withheld further fiscal information. Riot asserts their combined company would be the leading publicly listed Bitcoin mining entity, boasting roughly 1 GW of power capacity and 19.6 EH/s of self-mining capability currently, projected to increase to 1.5 GW and 52 EH/s by year's end.
Bitfarms has been non-responsive regarding a request for comments from Cointelegraph by the time of this article's publishing.
Published At
5/28/2024 9:17:18 PM
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