Analysts at H.C. Wainright have expressed skepticism about the likelihood of Riot Blockchain successfully acquiring Bitfarms, citing Bitfarms’ board disapproval and the inadequacy of the proposed premium.
In a recent research note, lead analyst Mike Colonnese pointed out that Bitfarms’ board had already rejected Riot’s initial offer, and the proposed premium was not enticing enough for Bitfarms’ shareholders. “The premium is not high enough to compel Bitfarm shareholders to agree to the deal given the deep valuation discount at which shares currently trade, in our view,” Colonnese wrote. He also emphasized that the offer is currently non-binding and that no definitive agreement has been reached.
Riot Blockchain plans to request a special meeting with Bitfarms’ shareholders at the upcoming annual shareholder meeting on Friday. During this period, Riot aims to nominate new independent directors over the next four months to secure board approval for the acquisition.
Riot’s board has unanimously approved the acquisition proposal and the company is financially prepared to execute the transaction. As of April 30, Riot had over $700 million in cash and 8,872 unencumbered Bitcoin (BTC) on its balance sheet.
Details of the Acquisition Offer
On May 28, Riot announced its acquisition offer for Bitfarms, proposing to buy all BITF shares at $2.3 per share, which values the acquisition at $950 million. Riot’s offer includes a combination of cash and common stock, allowing Bitfarms shareholders to potentially retain ownership of up to 17% of the merged company, providing them with a stake in a larger, more diversified entity.
Previous Attempts and Rejections
In April, Bitfarms swiftly rejected Riot’s initial acquisition proposal, which did not engage in substantive dialogue. Riot’s CEO, Jason Les, voiced concerns about the actions of Bitfarms’ founders, Nicolas Bonta and Emiliano Grodzki, suggesting they might not be acting in the best interests of all shareholders.
Despite the challenges, Riot remains committed to the acquisition, leveraging its robust financial position and strategic vision to convince Bitfarms’ shareholders and board members of the merger’s potential benefits. Riot’s current stock price stands at $10.34, with a “Buy” rating and a price target of $17.00 per share.
Conclusion
While Riot Blockchain has the resources and strategic intent to pursue the acquisition of Bitfarms, the success of the deal hinges on overcoming board resistance and offering a sufficiently attractive premium to Bitfarms’ shareholders. The upcoming shareholder meeting and the efforts to appoint new independent directors will be crucial in determining the future of this proposed merger.
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