Riot Platforms has launched a hostile takeover of Bitfarms, one of the biggest Bitcoin mining companies globally. The company, which made its offer in April, has now become a 14% shareholder in Bitfarms.
Riot Platforms and Bitfarms acquisition
Bitfarms has said that it was not interested in the bid, which it believes undervalues the company. As a result, it has implemented a poison pill, which lets it increase the number of outstanding shares to dilute Riot’s ownership.
Without the poison pill, Riot Platforms had the freedom to increase its ownership of Bitfarms and have a bigger say on its strategy.
Riot Platform’s interest in Bitfarms is an important one in the Bitcoin mining industry. For one, it will be the biggest deal ever in the sector and is a sign that these companies are interested in having scale.
It is easy to understand why Riot Platforms is interested in Bitfarms. First, most mining companies are under substantial pressure after the recent Bitcoin halving event in April. Indeed, all companies I have tracked mined fewer coins in May than in April.
Second, Bitfarms is one of the best companies in the industry because of its cost of producing coins. Data shows that it spends about $20,000 to mine a Bitcoin while Riot Platforms spends over $23,000.
Need for scale in Bitcoin mining
Third, the combined company would likely be the biggest Bitcoin mining company in the industry. Analysts expect Bitfarms’ revenue to jump to over $258 million and $504 million in 2024 and 2025, respectively. Riot Platforms will generate $409 million and $795 million.
Mergers and acquisitions have always been a good approach in the mining industry. BHP, the biggest mining company in the world, got its size by buying Billiton in 2001. Glencore became a giant by buying XTrata while Anglo American bought Sirius and De Beers.
Looking ahead, I expect that Riot Platforms will continue making its pursuit of Bitfarms as the hostile takeover continues. The alternative scenario is where another company like Marathon Digital and CleanSpark comes in and places a bid.
Also, there is a likelihood that the hostile takeover will open the room for more deals in the mining industry. Some of the companies that could become takeover targets are the likes of Iris Energy, TeraWulf, Bitdeer, and Hut 8 Mining. Core Scientific has already rejected a bid from CoreWeave and could become a takeover target too.
