Riot Offers $950 Million to Acquire Bitfarms in Hostile Takeover Amid CEO Controversy
Riot Platforms announced an offer to acquire Bitfarms for approximately $950 million, reflecting a 24% premium to Bitfarms’ one-month volume-weighted average stock price as of May 24.
Riot’s decision to make a hostile takeover bid follows Bitfarms’ board of directors rejecting a private offer without substantive participation, according to a press release.
The proposal, first proposed privately on April 22, comes amid turmoil within Bitfarms, including a CEO dispute and subsequent lawsuits.
Largest public miner
The acquisition aims to combine Riot’s financial strength and strategic vision with Bitfarms’ existing operations to create the world’s largest publicly traded Bitcoin mining company. Riot Chairman Benjamin Yi said:
“The combination of Bitfarms and Riot will create the largest publicly traded Bitcoin mining company globally, with geographically diverse operations well-positioned for long-term growth.”
Riot, already Bitfarms’ largest shareholder with a 9.25% stake, is offering a mix of cash and common stock, which would see shareholders of the latter own about 17% of the combined company.
The proposed merger would create a powerful Bitcoin mining system with a current power capacity of approximately 1GW and a proprietary mining capacity of 19.6EH/s, potentially increasing to 1.5GW and 52EH/s by the end of the year.
Citi is acting as financial advisor to Riot, and Paul, Weiss, Rifkind, Wharton & Garrison LLP, along with Davies Ward Phillips & Vineberg LLP, is acting as legal advisor.
Bitfarms has yet to publicly respond to Riot’s latest proposal.
CEO dispute
The Riot announcement comes amid serious uproar at Bitfarms regarding the firing of former CEO Geoffrey Morphy, who has filed a lawsuit against the company for wrongful termination.
Bitfarms announced in March that Morphy would step down from his role later this year once a replacement is found. The acquisition was intended to ensure a smooth leadership transition while the company searches for a new CEO.
But Morphy filed a $27 million lawsuit against the company on May 10, seeking aggravated and punitive damages for alleged breach of contract and wrongful termination. The lawsuit sought $27 million in damages and also included claims against certain members of Bitfarms’ board of directors.
The filing of the lawsuit immediately accelerated Morphy’s firing on May 13.
Bitfarms appointed co-founder and chairman Nicolas Bonta as interim CEO following Morphy’s dismissal. The company said Morphy’s claims are without merit and that it plans to defend them vigorously.
governance issues
Morphy’s sudden resignation and subsequent legal battle have raised significant concerns about governance practices within Bitfarms, particularly at a critical time for the company and the broader mining industry.
The dispute has compounded the challenges facing Bitfarms, including operational and market pressures following the recent Bitcoin halving. It is also raising concerns among shareholders, including Riot.
Riot executives, including CEO Jason Les, have raised concerns about Bitfarms’ governance since the dispute, particularly the actions taken by co-founders Bonta and Emiliano Grodzki.
Les said in a social media post:
“We are deeply concerned that the founders of the Bitfarms Board of Directors may not be acting in the best interests of all Bitfarms shareholders. The sudden dismissal of the Bitfarms CEO raises serious governance issues.”
Riot plans to convene a special shareholders’ meeting following Bitfarms’ annual and special general meetings on May 31, 2024, to propose new independent directors to the Bitfarms board of directors.
