Bitfarms Deems Riot’s $950 Million Buyout Offer Undervalued

A major power struggle is heating up between two behemoths in the Bitcoin mining industry. Canada-based Bitfarms and Colorado-based Riot Platforms clash over a potential takeover.

Notably, Bitfarms has accused Riot Platforms of attempting a hostile takeover, sparking a contentious battle for control.

Bitfarms Takeover Battle Heats Up

On May 28, Riot Platforms initiated a bid to acquire Bitfarms with an offer valued at $950 million. This offer was based on Bitfarms' one-month volume-weighted average share price as of May 24, 2024.

The proposal was intended to acquire a significant portion of Bitfarms. However, it quickly faced resistance as Bitfarms stakeholders expressed strong disapproval of the offer.

Riot Platform's proposal implied that stakeholders would relinquish more than 15% of their ownership, which many found unacceptable. The dissatisfaction among Bitfarms' stakeholders, in turn, set the stage for an intense confrontation.

Undeterred by the initial rejection, Riot Platforms increased its stake in Bitfarms in June by purchasing approximately six million common shares for $111 million. This move increased Riot's stake in Bitfarms to 13.1%, intensifying the pressure on Bitfarms' management and stakeholders.

In response, Bitfarms swiftly condemned Riot's actions, labelling the purchase of additional shares as an attempt to undermine the integrity of the acquisition process.

In a strongly worded statement, Bitfarms asserted that Riot's actions did not align with the best interests of Bitfarms' shareholders.

Further, Bitfarms established a special committee comprising independent directors to address the takeover attempt. This committee was tasked with evaluating Riot's unsolicited proposals.

After careful consideration, the committee concluded that Riot's offer significantly undervalued Bitfarms and would not favour the shareholders in any way. In the meantime, the situation remains dynamic, with both companies standing firm in their positions.

The Defensive Move

Furthermore, on June 10, Bitfarms took a decisive step to protect itself from the unwanted takeover attempt by Riot Platforms. To safeguard its interests, Bitfarms adopted a shareholder rights plan, a strategy commonly referred to as a poison pill.

This plan is designed to prevent Riot from acquiring a controlling stake in Bitfarms through unsolicited bids. The idea is to make any hostile takeover effort prohibitively expensive and difficult effectively.

The company has accused Riot of attempting to short-circuit the decision-making process. This implies that Riot is trying to bypass proper channels and exert undue pressure on Bitfarms' management and shareholders.

By adopting the shareholder rights plan, Bitfarms aims to ensure that any potential takeover or merger aligns with its long-term strategic goals and fair valuation.

Bitfarms operates 12 Bitcoin mining facilities in four countries: the United States, Canada, Argentina, and Paraguay. This international presence showcases the company's significant role in the global Bitcoin mining industry, positioning it favourably as a takeover target.

Meanwhile, in May, Bitfarms announced the resignation of its former CEO, Geoffrey Morphy, who stepped down after initiating a lawsuit against the company. After Morphy's departure, Nicolas Bonta has served as the interim CEO and president.

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