Riot Platforms Increases Stake in Bitfarms Despite Rejected Takeover Bid

Riot Platforms, a major player in the Bitcoin mining industry, persists in acquiring shares of Bitfarms even after its initial takeover bid was turned down. Toronto-based Bitfarms labeled Riot’s April offer, which valued the company’s shares at $2.30 each, as undervaluing the company. This rejection came despite Bitfarms’ share price standing at $2.81 just before the market opened on Friday.

Continuing its pursuit, Riot Platforms purchased approximately 1.4 million additional Bitfarms shares for nearly $3.9 million on Thursday, bringing its total ownership to 14% of Bitfarms’ shares. Riot’s ongoing interest in Bitfarms underscores its strategic intentions, although it remains open to adjusting its stake upwards or downwards, as noted in a news release on Friday.

Amid these developments, Riot plans to call a special shareholder meeting to nominate what it describes as “well-qualified and independent” directors. This move highlights Riot’s concerns regarding Bitfarms’ corporate governance, especially following the recent ouster of Geoffrey Morphy as CEO after he initiated legal proceedings against Bitfarms in the Superior Court of Ontario.

In response to potential takeover threats, Bitfarms has implemented a shareholder rights plan. Effective this week, the plan attaches a “right” to each common share issued after June 20, aimed at limiting any single shareholder from gaining control if they acquire at least 15% of the outstanding shares between June 20 and September 10. This mechanism is designed to safeguard the company’s strategic review process from being influenced by major shareholders like Riot.

Despite this safeguard, Bitfarms has clarified that the rights plan does not prevent unsolicited takeover bids. Instead, it ensures the integrity of the ongoing review process, allowing the company to determine its best strategic path forward without undue influence.

Bitfarms’ statement also expressed its perspective on Riot’s actions, suggesting that Riot’s frustrations stem from an inability to leverage their initial non-binding offer, which Bitfarms perceived as opportunistic and overshadowed by vague corporate governance concerns.

On the operational front, Riot Platforms, primarily operating out of Texas, boasts a hash rate of 14.7 exahash per second. In contrast, Bitfarms had a hash rate of 7.5 EH/s at the end of May, with plans to expand this to 21 EH/s by year-end.

A successful takeover by Riot would mark a significant consolidation in the industry, especially notable as the first major deal between publicly traded miners following the Bitcoin halving event. This halving reduced mining rewards per block, prompting industry expectations of consolidation due to the increased financial pressures on miners.

Industry experts like Architect Partners’ Elliot Chun, speaking to Blockworks, had previously indicated that significant mergers among large public miners were unlikely around the halving, except in cases where they operated in different geographical regions. This backdrop sets the stage for ongoing developments between Riot Platforms and Bitfarms as both navigate the evolving landscape of Bitcoin mining.