Riot Platforms, Inc. (NASDAQ: RIOT) continued its ongoing campaign to influence Bitfarms Ltd (NASDAQ: BITF) (TSX: BITF) shareholders into supporting its bid for a hostile takeover.
It did so on Tuesday through the issuance of an open letter to Bitfarms shareholders in an attempt to reinforce its narrative of the company’s broken and inadequate governance.
Riot discussed the recent shakeups with Bitfarms’ board of directors, noting the resignations of co-founders Emiliano Grodzki and Nicolas Bonta in recent months. Riot had previously targeted both for replacement.
“While these changes represent a step in the right direction, they have been reactive and insufficient to address Bitfarms’ broken governance,” Riot wrote in the open letter. “These actions followed Riot’s sustained public pressure and would not have occurred had Riot not challenged the entrenchment of the Bitfarms board.”
Riot previously disclosed that it privately offered to acquire Bitfarms for $2.30 per share in April, but Bitfarms quickly rejected the offer, believing it significantly undervalued the company.
This led to an accusation from Riot against the board of Bitfarms about not acting in the best interests of all shareholders. It also led to a campaign to replace Bitfarms leadership with “independent” nominees of its choosing. Riot has also been rapidly acquiring shares in the Canadian miner, now holding 19.9 per cent stake in the firm.
The company criticizes Bitfarms’ board for prioritizing self-preservation over shareholder engagement.
Read more: BitFarms acquisition goes beyond cryptomining to include environmental angle
Read more: Riot Platforms merger with Bitfarms obstructed by poison pill tactics
Poison pill strategy invalidated by Ontario markets tribunal
Riot points out Bitfarms’ failed attempt to implement a poison pill strategy, which was invalidated by the Ontario Capital Markets Tribunal after Riot’s intervention. It also criticizes the unilateral appointment of Fanny Philip to the board without consulting Riot, despite Riot being the largest shareholder and having proposed their own slate of directors.
Additionally, Riot raises concerns about the acquisition of Bitcoin miner and energy provider, Stronghold Digital Mining Inc. (NASDAQ: SDIG), which they believe was overpriced and not in the best interest of shareholders, suggesting it served to further entrench the board.
Bitfarms agreed to pick up Stronghold for USD$125 million and its outstanding USD$50 million debt.
The acquisition also adds approximately 4.0 exahashes per second (EH/s), supported by a current nameplate generated power capacity of 165 megawatts. The company plans to upgrade its fleet to increase its hash rate to approximately 10 EH/s by 2025.
“Shareholders should seriously question the timing of Bitfarms’ announcement of its agreement to acquire Stronghold,” said Riot. The letter stated that the purchase price represented a 100 per cent premium to Stronghold’s market valuation at the time. It also suggested that shareholders were paying more than necessary.
Also, Riot expresses frustration over the continued lack of engagement from Bitfarms’ Board in working with them to consider changes or combinations that could enhance shareholder value.
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