CASTLE ROCK, Colo. - Riot Platforms, Inc. (NASDAQ: NASDAQ:RIOT), a significant player in Bitcoin mining, has put forward a proposition to acquire all outstanding shares of Bitfarms Ltd. (NASDAQ/TSX: BITF) for US$2.30 per share, which amounts to a total equity value of approximately US$950 million. This offer reflects a 24% premium over Bitfarms' one-month volume-weighted average share price as of May 24, 2024, and a 20% premium over its share price on April 19, 2024.
Riot, now Bitfarms' largest shareholder with a 9.25% stake, initially presented the proposal privately to the Bitfarms Board on April 22, 2024, but it was rejected without substantial discussion. In response, Riot intends to requisition a Special Meeting of Bitfarms’ shareholders post the Annual General and Special Meeting scheduled for May 31, 2024, to seek the addition of new independent directors to Bitfarms' board.
The proposed merger would create a leading Bitcoin mining entity with significant scale, boasting approximately 1 GW of current power capacity and 19.6 EH/s of current self-mining capacity. By the end of 2024, the combined company is expected to have up to 1.5 GW of power capacity and 52 EH/s of self-mining capacity. The combined company would also have 15 facilities across the United States, Canada, Paraguay, and Argentina.
Riot's strong financial position, highlighted by over US$700 million in cash and 8,872 unencumbered Bitcoin as of April 30, 2024, is set to support Bitfarms' growth plans, providing access to public equity markets. Bitfarms shareholders would own up to approximately 17% of the combined company, with the deal offering both immediate cash value and the potential for future growth.
The proposal has been unanimously approved by Riot's Board of Directors and is not subject to a financing condition or a Riot shareholder vote. However, it remains non-binding and subject to customary conditions, including a definitive transaction agreement.
Benjamin Yi, Executive Chairman of Riot, expressed disappointment over Bitfarms Board's rejection of the proposal and confidence in the value it offers to Bitfarms shareholders. Jason Les, CEO of Riot, raised concerns about Bitfarms' corporate governance, particularly in light of the recent CEO termination and allegations in a related lawsuit.
Financial advisory for the proposed transaction is provided by Citi, with legal counsel from Paul, Weiss, Rifkind, Wharton & Garrison LLP and Davies Ward Phillips & Vineberg LLP. This news is based on a press release statement, and there can be no assurance that a transaction between Riot and Bitfarms will be consummated.
In other recent news, Riot Platforms, a significant player in Bitcoin mining, has seen a series of developments. The company reported a decrease in Bitcoin production in April, despite an increase in its Bitcoin holdings and the activation of its second Bitcoin mining facility in Corsicana, Texas. The new facility is expected to more than double Riot's current hash rate capacity by the end of 2024. Riot's strategic expansion includes the construction of additional buildings at the Corsicana site and significant miner purchases.
Analysts have adjusted their outlook on Riot Platforms. H.C. Wainwright reduced the price target to $17.00 from $20.00 following Riot's Q1 2024 earnings report, despite maintaining a Buy rating. B.Riley also reduced its price target to $16 from $17, following Riot's report of a marginal month-over-month increase in Bitcoin production. However, JPMorgan (NYSE:JPM) upgraded the stock from Neutral to Overweight, setting a price target of $15.00, expressing confidence in Riot's growth trajectory.
Riot Platforms' Q1 2024 results confirmed progress towards its end-of-year hash rate goal. The company's Bitcoin mining revenues met expectations, and Riot exceeded bottom-line expectations, largely due to a gain from the change in the value of Bitcoin on its balance sheet. The company also reported having substantial cash reserves and owning a significant number of Bitcoins.
InvestingPro Insights
In light of Riot Platforms, Inc.'s (NASDAQ: RIOT) bid to acquire Bitfarms Ltd., it is pertinent to consider Riot's financial health and market performance. With a market capitalization of $2.99 billion and a P/E ratio of 13.73, Riot demonstrates a certain level of investor confidence. The P/E ratio, which adjusts to 21.4 for the last twelve months as of Q1 2024, still indicates a valuation that might appeal to investors looking for growth opportunities, especially when coupled with the company's PEG ratio of 0.17 for the same period, suggesting potential for future earnings growth relative to its price.
Despite recent volatility, with a 1-month price total return of -13.08% and a 3-month price total return of -33.74%, Riot holds a strong financial position. This is exemplified by its significant cash reserves, which exceed its debt, as indicated by one of the InvestingPro Tips. Furthermore, the tip that Riot is trading at a low P/E ratio relative to near-term earnings growth may signal that the company is undervalued given its projected earnings trajectory, making the timing of the acquisition offer to Bitfarms noteworthy.
For readers looking to delve deeper into Riot's financials and market outlook, there are 15 additional InvestingPro Tips available at https://www.investing.com/pro/RIOT. These tips provide a comprehensive understanding of the company's financial status, including sales growth expectations, cash burn rate, and profitability forecasts. Subscribers can access these insights and take advantage of an additional 10% off a yearly or biyearly Pro and Pro+ subscription with the coupon code PRONEWS24.
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