After the news a few days ago about Riot Blockchain’s interest in Bitfarms, the crypto mining company is taking steps to make the acquisition more difficult.
In fact, Bitfarms has adopted a plan regarding shareholder rights that would allow a hostile takeover attempt only in very limited circumstances.
Summary
Riot Blockchain and the expansion of crypto mining
Riot Blockchain, now known as Riot Platforms, is a publicly traded company that engages in crypto mining.
A few days ago, the news spread that it is looking for new solutions to compensate for the reduction in revenue caused by the halving of Bitcoin.
The halving, which occurred on April 20, halved the reward for miners, but the competition has not decreased by much.
Taking the weekly averages from Hashrate Index, Bitcoin’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 in which those with more hashrate earn more, so miners are effectively encouraged to keep their hashrate as high as possible.
Only with the halving, the prize revenues have been halved, and since it is precisely the hashrate that consumes electricity, and therefore generates the highest costs, the miners now have a problem.
The profitability of mining has collapsed after the halving, dropping from about $0.11 per day per THash/s to the current $0.05, more than halving. This level is currently the lowest ever.
RIOT in the stock market
Riot Platforms is listed on the stock exchange at Nasdaq with the ticker RIOT.
After the annual peaks in February, when the price of its shares had risen above $17, during the month and a half preceding the halving it collapsed below $8, losing more than half of its value.
The investors and speculators feared that the company might have problems as a result of the halving, and in fact, they were right.
However, subsequently the price has risen, so much so that it is now just below $10.
The current price level, however, is close to the lows of 2024, and it is in line with what RIOT stocks had in mid-December 2023 before the rise began.
It is worth noting, however, that it is higher than that of October and November, when it was even below 9$, and especially that it is much higher than that of the end of 2022, when it dropped to almost 3$.
It is however important to highlight that the historical highs of 2021 are still very far away, given that it reached almost 80$.
The difference between the almost $80 of February 2021 and the $17 of February 2024 says a lot about how excessive the FOMO was back then, as well as how much the financial markets have already “punished” Riot before the halving due to the inevitable effects that this event would have had on its revenues.
The acquisition of Bitfarms
Among the various solutions that Riot Platforms is trying to study to contain the losses, there are mergers and acquisitions.
In particular, he has set his eyes on Bitfarms, another crypto mining company from America.
Anche Bitfarms è quotata in borsa al Nasdaq, con i ticker BITF, ma mentre ieri RIOT è salita dell’1,8$, BITF è scesa di quasi il 4,2%. In after-market ha poi recuperato un misero 0,4%.
The BITF stock, however, is performing less poorly than that of RIOT in the medium-long term, because compared to the $1.1 at the end of 2023, the current price of $2.3 is significantly higher.
Furthermore, in percentage terms, it is less distant from the historical highs of 2021 compared to RIOT, and from the 0.4% at the end of 2022, it has gained a lot.
So it 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: The opposition of Bitfarms to the OPA of Riot Blockchain
Bitfarms, however, would not want to be acquired.
It should be noted that Bitfarms is a “public” company, because as much as 75% of its shares are on the market (in borsa).
So in theory Riot Platforms should not have major problems launching a hostile takeover bid against it, provided that it offers shareholders an interesting selling price.
The company, however, reacted to try to oppose this hostile takeover, developing a plan regarding shareholders’ rights 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 at a significant discount compared to the market price.
Bitfarms is a Canadian company, and in Canada these measures are allowed by law. The result would be that Riot could still launch a hostile takeover bid, but it would see its shareholding diluted once the shares are purchased on the market.
Riot is actually already a shareholder of Bitfarms, and in fact, the climb has already begun, given that today it should have become the single largest shareholder with more than 11% of the shares.
Furthermore, during the recent shareholders’ meeting of Bitfarms, its very own co-founder, Emiliano Grodzki, was ousted from the board of directors.
In other words, a real internal clash is taking place within Bitfarms between Riot, which is trying to take it over, and the other shareholders who do not want the company to be acquired in this way.
