Riot CEO claims Bitfarms not acting in best interests of shareholders amid acquisition rejection

Riot Platforms announced a proposal to acquire Bitfarms for US$2.30 per share. This acquisition would create the world’s largest publicly listed Bitcoin miner, delivering substantial value to shareholders. Riot has already acquired a 9.25% stake in Bitfarms, becoming its largest shareholder, and plans to request a special meeting of Bitfarms’ shareholders to add new independent directors to its board.

The proposal represents a 24% premium to Bitfarms’ one-month volume-weighted average share price as of May 24, 2024, and a 20% premium to its share price on April 19, 2024. The consideration consists of cash and Riot common stock, potentially allowing Bitfarms’ shareholders to own approximately 17% of the combined company. This proposal was reportedly delivered privately on April 22 but was rejected by the Bitfarms Board without substantive dialogue.

Riot argues that combining the companies would create significant strategic and financial benefits, including a vertically integrated Bitcoin mining company with about 1 GW of current power capacity and 19.6 EH/s of current self-mining capacity, expanding to 1.5 GW and 52 EH/s by year-end. This scale would position the combined entity as the largest Bitcoin mining company globally.

The combination would enhance geographic diversification, with 15 facilities across the United States, Canada, Paraguay, and Argentina, offering up to 2.2 GW of power capacity when fully developed. Riot’s robust financial profile, including over $700 million in cash and minimal corporate debt, would support Bitfarms’ growth plans and improve access to public equity markets.

Benjamin Yi, Executive Chairman of Riot, emphasized the strategic fit and growth potential while expressing disappointment at Bitfarms’ swift rejection of the proposal. CEO Jason Les raised concerns about Bitfarms’ governance, citing the abrupt termination of its CEO and related allegations as troubling signs.

“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. The abrupt termination of the Bitfarms CEO without a transition plan in place[…] raise serious governance questions.”

The proposal, unanimously approved by Riot’s Board of Directors, is non-binding and subject to customary conditions. Riot’s financial advisor is Citi, and its legal advisors are Paul, Weiss, Rifkind, Wharton & Garrison LLP, and Davies Ward Phillips & Vineberg LLP. Riot claims to remain committed to pursuing this acquisition, aiming to create a leading Bitcoin mining company with enhanced operational and financial capabilities.

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