Blockchain
Bitfarms Opposes Riot Blockchain Acquisition
Following the news a few days ago of Riot Blockchain’s interest in Bitfarms, the cryptocurrency mining company is taking steps to make the acquisition more difficult.
Bitfarms has indeed adopted a shareholder rights plan that would allow a hostile takeover attempt only in very limited circumstances.
Riot Blockchain and the expansion of crypto mining
Riot Blockchain, now known as Riot Platforms, is a publicly traded cryptocurrency mining company.
A few days ago, the news It is widespread that new solutions are being sought to compensate for the reduction in revenues caused by the halving Bitcoin.
The halving, which took place on April 20, halved the reward for miners, but competition hasn’t diminished much.
Taking the weekly averages from the Hashrate indexBitcoin’s hashrate went from 650 Eh/s on April 19 to the current 604, reducing by only 7% after the halving.
Mining is a competition where whoever has the highest hashrate earns the most, so miners are actually encouraged to keep their hashrate as high as possible.
Only with the halving were the rewards revenues halved, and since it is the hashrate that consumes electricity, and therefore generates the highest costs, miners now have a problem.
Profitability of the mining sector collapsed after halving, going from around $0.11 per day per THash/s to the current $0.05, more than halved. This level is currently the lowest ever.
RECOVERY in the stock market
Riot Platforms is publicly traded on the Nasdaq under the ticker RIOT.
After the annual highs in February, when the price of its shares rose above $17, in the month and a half preceding the halving it collapsed below $8, losing more than half of its value.
Investors and speculators feared that the company might run into trouble due to the halving, and indeed they were right.
However, the price subsequently rose, so much so that it now stands just under 10 dollars.
The current price level, however, is near 2024 lows and is in line with what RIOT stock was in mid-December 2023 before the rally began.
It is worth noting, however, that it is higher than that of October and November, when it was even below $9, and above all that it is much higher than that of the end of 2022, when it had fallen to almost $3.
However, it is important to highlight that the historical highs of 2021 are still very far away, given that it reached almost $80.
The difference between the almost 80 dollars in February 2021 and the 17 dollars in February 2024 says a lot about how excessive the FOMO was at the time, as well as how much the financial markets have already “punished” Riot before the halving for the inevitable effects that this event would have had on its revenues.
The acquisition of Bitfarms
Among the various solutions that Riot Platforms is trying to study to contain losses, there are mergers and acquisitions.
In particular he has set his sights on Bitfarms, another cryptocurrency mining company from America.
Bitfarms also trades on the Nasdaq, under the tickers BITF, but while RIOT rose $1.8 yesterday, BITF fell nearly 4.2%. In the aftermarket it then recovered a paltry 0.4%.
The BITF stock, however, is performing less badly than the RIOT stock in the medium-long term, because compared to $1.1 at the end of 2023, the current price of $2.3 is decidedly higher.
Furthermore, in percentage terms, it is less distant from the all-time highs of 2021 than RIOT, and from 0.4% at the end of 2022, it has gained a lot.
It therefore really seems that Riot Platforms wants to incorporate a rival company that, at least on the stock market, is performing better.
Note that RIOT capitalizes 2.8 billion dollars, while BITF less than 900 million, so it is three times smaller.
Crypto mining: Bitfarm’s opposition to Riot Blockchain’s takeover bid
Bitfarms, however, would not like to be acquired.
It should be noted that Bitfarms is a “public” company, because as many as 75% of its shares are on the market (on the stock exchange).
So in theory Riot Platforms shouldn’t have much trouble launching a hostile takeover bid against it, as long as it offers shareholders an attractive selling price.
The company, however, responded to try to counter this hostile takeover by developing a shareholder rights plan that would allow a hostile takeover only in very limited circumstances.
In fact, the plan provides that in the event that a single entity manages to acquire at least 15% of the shares by September 20, and then increases the stake to 20% without the approval of the board, the other shareholders could purchase ordinary shares with a significant discount compared to the market price.
Bitfarms is a Canadian company and in Canada these measures are permitted by law. The result would be that Riot could still launch a hostile takeover bid, but would see its stake diluted once the shares were purchased on the market.
Riot is in fact already a shareholder of Bitfarms, and in fact the climb has already begun, given that today it should have become the largest single shareholder with over 11% of the shares.
Furthermore, during Bitfarms’ recent shareholder meeting, its own co-founder, Emiliano Grodzki, was ousted from the board of directors.
In other words, a real internal conflict is taking place within Bitfarms between Riot, who is trying to take it over, and the other shareholders who do not want the company to be acquired in this way.