Crypto Miner Truce Leaves Open the Possibility of Riot Taking Over Bitfarms

While Bitcoin miner Bitfarms Ltd. has brokered a truce with Riot Platforms Inc. over a months-long takeover fight, the agreement still leaves open the possibility for an acquisition.

(Bloomberg) — While Bitcoin miner Bitfarms Ltd. has brokered a truce with Riot Platforms Inc. over a months-long takeover fight, the agreement still leaves open the possibility for an acquisition.    

Under an pact unveiled Monday, Bitfarms’ Andrés Finkielsztain has stepped down from its board and been replaced by a Riot-backed nominee. Riot agreed that, during the term of the agreement, it will not acquire over 20% or more of the company without the approval of the board, “other than for the sole purpose of or in connection with making a take-over bid,” according to a filing with the Canadian government. 

“The agreement still leaves the door open for future possibilities, should Riot wish to revisit the idea of a takeover under more favorable conditions,” said Matthew Kimmell, digital asset analyst at CoinShares. 

A spokesperson for Castle Rock, Colorado-based Riot declined to comment beyond the press release. Toronto-based Bitfarms didn’t immediately response to a request for comment. 

Riot’s unsolicited $950 million offer to buy Bitfarms was rebuffed by the smaller rival in April. Bitfarms ended up adopting a “poison pill” defense strategy to prevent hostile takeovers as Riot continued to buy up its shares. 

Amy Freedman, one of Riot three nominees, will join the board. Bitfarms will also elect an independent director as its sixth board member at the special shareholders meeting later this year. Two co-founders of Bitfarms have departed from the board since Riot launched its takeover bid. 

Bitcoin mining is an energy-intensive process in which miners spend billions of dollars on specialized computers and electricity to validate encrypted transactions on the Bitcoin blockchain and earn rewards in the form of the token. The sector has seen increasing consolidation as revenue for such companies plummets due to an April software update in Bitcoin. Called the halving, the blockchain is preprogrammed to reduce Bitcoin rewards by 50% every four years to maintain its hard cap of 21 million.

Shares of Riot have dropped around 50% this year, while Bitfarms is down about 30%. Bitcoin has increased 50% during the same period. 

Riot has one of the world’s largest Bitcoin mining facilities in Texas while Bitfarms has extended its foothold across the globe including Canada and South America. 

“This looks like it could be a mutually beneficial resolution, allowing both parties to move forward without the appearance of a loss,” Kimmell said. “Riot can point to its successful nomination of a board member and its influence on Bitfarms’ governance, while Bitfarms can maintain that its strategy to resist a full takeover remains intact.”