Since the beginning of the year, Bitcoin Mining giant Riot Platforms has been trying to forcefully buy out its rival Bitfarms. It is a battle in which the management of both companies despise each other and do everything possible to achieve their goals.
Bitfarms, a company with Argentine roots, is defending itself with all the means at its disposal to avoid the acquisition. It even considered the poison pill, which is used to limit the decision-making power of aggressive shareholders. However, this strategy failed due to a court order. Now, Bitfarms is presenting a new move.
The Bitcoin Mining War
The failure of the first attempts to acquire Bitfarms did not discourage Riot’s management, which continues to pursue its interests. Over the past few months, the company has increased its stake with massive purchases of shares that give it almost 20% ownership. This move put the defending company on the ropes.
However, the latter is not giving up either and recently announced that it was in negotiations to acquire a smaller company, Stronghold Digital Mining. The agreement was announced on August 21 and its objective is to increase the power of Bitfarms’ management and reduce Riot’s influence. The latter, as can be expected, did not welcome this step.
As a recent Bloomberg article reads, Riot warns Bitfarms not to proceed with this purchase. This offer to buy $175 million in shares for Stronghold is considered an exaggeration by Riot. This offer includes $50 million in assumed debt and this represents a premium of more than 100% over the closing price of Stronghold shares the day before the announcement.
This move is an almost obvious strategy to avoid a purchase by Riot, given that it would reduce its stake. “As the largest shareholder of Bitfarms, we are concerned that the Bitfarms Board did not conduct this transaction with the best interests of shareholders in mind,” Riot said.
We are pleased to announce that #Bitfarms you have entered into a definitive agreement to acquire @Stronghold_DM.
Stronghold brings to Bitfarms vertically integrated crypto asset mining operations and access to the strategically desirable PJM grid, the largest wholesale electricity… pic.twitter.com/HemcStdETS
— Bitfarms (@Bitfarms_io) August 21, 2024
Could Bitfarms’ merger with Stronghold deter Riot?
In theory, it is possible that Bitfarms’ move to merge with Stronghold could put an end to Riot’s ambitions to acquire it by force. There are several factors to consider in this regard. For example, the unification of the two Bitcoin miners would make Bitfarms a larger and more expensive company.
As a result, the costs will not only be acquisition costs, but also integration costs due to the fact that it is a larger and more complex firm. On the other hand, being larger, Bitfarms would have a greater capacity to defend itself against hostile offers such as that of Riot.
It remains to be seen what the state of market cap will be once the merger process is complete. If it becomes too inflated, Riot will likely refrain from making a new takeover offer. Overall, while this move may set Riot back, the latter is in desperate need of expansion.
On October 29th, Bitfarms will hold a special meeting in which Riot will have the opportunity to fill key management positions at Bitfarms. As you can see, the Bitcoin mining drama is a chapter that will surely not be closed soon.
While Riot claims that this deal is meant to undermine it, Bitfarms CEO Ben Gagnon says that talks with Stronghold are not new. “After three years of ongoing discussions, I am proud to announce this transformative acquisition, which is a decisive step in securing a strong future for Bitfarms,” he stresses.
BITF shares fail to improve despite positive announcement of merger with Stronghold. Source: Yahoo Finance
Bitfarms shares continue to suffer
Since the announcement of the Stronghold purchase, BITF shares have been on a downward spiral. At the time of the announcement, each share was trading at $2.38. Within a few days, they rose sharply. However, market pressure and BTC’s poor performance caused a sharp decline.
On Tuesday, the company’s shares were trading at $2.01 per unit, according to Yahoo Finance. On the other hand, this Canadian-based mining company reported its earnings for the month of August. During that period, it generated a total of 233 bitcoins and increased its balances to 1,103 BTC.
On the other hand, the company’s hash power grew by 2% in the same month. With this, its mining capacity reached 11.3 EH/s. Despite this increase, its revenue reflects a decrease of -8% compared to the previous month’s revenue. This last scenario is a reality for the entire mining sector. As reported by this media, August was the worst month so far in 2024 in terms of miners’ earnings.
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