Proactive Investors - As far back as the two-trillion cryptocurrency collapse of 2022, pundits have predicted a large-scale consolidation within the bitcoin mining sector.
Those predictions may finally be coming to fruition after Riot Platforms (NASDAQ:RIOT), one of the most highly valued bitcoin miners globally, made public a $2.30 per share offer for smaller rival Bitfarms (TSX-V:BITF).
Riot already has a 9.25% stake in Canada-listed Bitfarms Ltd (TSX:BITF), making it the single-largest shareholder in its rival.
The $2.30-per-share offer represents a 20% premium to Bitfarms (TSX-V:BITF)’ Monday closing price and follows a former, not-made-public offer in April.
According to Riot’s press statement, the Bitfarms board rejected the April offer “without engaging in substantive dialogue with Riot”.
Going hostile
Riot’s statement contained some notably charged language, highlighting “new allegations in a lawsuit brought by Bitfarms’ recently terminated CEO, if accurate, raise serious questions about whether certain directors are committed to acting in the best interests of all shareholders.”
As such, Riot intends to requisition a special meeting of Bitfarms’ shareholders on 31 May, where it will attempt to force through “new, well-qualified and independent” directors to the Bitfarms board.
Jason Les, chief executive of Riot, added: “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 at a critical period of execution for Bitfarms and the industry, as well as the allegations, if accurate, regarding the actions of certain members of the Bitfarms board set out in the lawsuit filed by that recently terminated CEO, raise serious governance questions.
“This is why we intend to call a Special Meeting to give shareholders a chance to bring needed change to the Bitfarms board and make repairing Bitfarms’ broken corporate governance and maximizing value for all Bitfarms’ shareholders their top priorities.”
According to Riot, a combination of the two businesses would create the largest bitcoin miner globally with approximately one gigawatt of current power capacity and 19.6 exahashes per second of mining capacity.
The combined company would have 15 facilities across the US, Canada, Paraguay and Argentina, with up to 2.2 GW of total power capacity when fully developed.
Riot also espoused a financial rationale for Bitfarms to accept the offer, with the former having 10 times the amount of cash and unencumbered bitcoin on the books than the latter.
Numerous emails sent by Proactive to Bitfarms’ press contact for a comment bounced back.
In the first quarter of 2024, Bitfarms penned an operating loss of $24 million, which included a $19 million accelerated depreciation on older miners, compared to a $13 million operating loss in the previous quarter.