Bitfarms Rejects $950 Million Acquisition Proposal from Riot Platforms, Citing Undervaluation

Bitfarms, a global Bitcoin mining company, confirmed on May 28 that it received and subsequently rejected an acquisition proposal from Riot Platforms on April 22, 2024.

Bitfarms Special Committee’s Evaluation

The proposal, offering $2.30 per Bitfarms common share in a combination of cash and Riot common stock, was thoroughly evaluated by a Special Committee of the Bitfarms Board, comprised solely of independent directors.

According to a Bloomberg report, Riot’s offer, which valued Bitfarms at approximately $950 million in equity, represented a 24% premium over Bitfarms’ one-month volume-weighted average share price as of May 24, 2024. The proposal suggested that Bitfarms shareholders would own up to 17% of the merged entity, claiming to provide substantial immediate value and potential for future growth within a financially strong company led by an experienced management team.

Rejection and Subsequent Actions

The initial proposal was submitted privately to the Bitfarms Board on April 22, 2024, but was rejected without substantive discussion. Following this rejection, Riot made the proposal public, citing new allegations from a lawsuit filed by Bitfarms’ recently terminated CEO, which questioned the commitment of certain directors to shareholder interests.

The Bitfarms Special Committee, after reviewing Riot’s proposal, concluded that it significantly undervalued the company and its future growth prospects. The committee requested customary confidentiality and non-solicitation agreements from Riot to facilitate meaningful discussions but did not receive a response.

The Special Committee is now conducting a thorough strategic alternatives review to ensure maximum shareholder value. This review could lead to various outcomes, including continuing with the current business plan, entering a strategic business combination or transaction, or selling the company.

Management Turmoil and CEO Lawsuit

The acquisition offer comes at a tumultuous time for Bitfarms, which is undergoing management changes. Following the departure of CEO Geoffrey Morphy, the company is in the process of finding a new CEO. Initially, Morphy was to remain with the company during the search for his successor.

On May 10, Morphy sued Bitfarms for breach of contract, wrongful dismissal, and $27 million in damages. Consequently, he was dismissed on May 13, and chairman and co-founder Nicolas Bonta was appointed interim CEO.

Conclusion

Bitfarms believes that continuing to execute its growth plan will maximize shareholder value. The company’s review and ongoing operational improvements aim to position Bitfarms for sustained growth and an enhanced market position within the Bitcoin mining industry.