Bitfarms mines 233 BTC in August as Riot pens open letter in takeover saga

Bitcoin miner Bitfarms reported generating 233 BTC ($13.9 million) in August, as its operational hashrate grew 2% month over month to 11.3 EH/s.

However, despite Bitfarms’ hashrate increase, the bitcoins it earned in August represent an 8% drop on July’s 253 BTC, which the firm attributed to higher average network difficulty levels during the month. Bitfarms’ August generation fell 39% year-over-year following the impact of the halving event on miners’ revenues in April and with network hashrate near all-time highs.

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Of the 233 BTC earned during August, the company said it had sold 147 BTC ($8.8 million) as part of its treasury management practices. The remaining 86 BTC ($5.1 million) were added to its bitcoin treasury, bringing Bitfarms’ holdings to 1,103 BTC ($65.1 million).

Bitfarms also agreed to acquire rival Stronghold Digital in a $175 million stock and debt-financed deal in August. “This acquisition will enable us to enhance and rebalance our energy portfolio, targeting an expansion to 950 MW by the end of 2025, with nearly 50% of our capacity based in the U.S.,” Bitfarms CEO Ben Gagnon said on Tuesday.

Rival miner Riot pens open letter to Bitfarms shareholders in takeover latest

Riot Platforms attempted to acquire Bitfarms in April for roughly $950 million. In June, Riot said it was ready to engage with a reconstituted Bitfarms board about a potential acquisition but withdrew its previous offer to acquire the company for $2.30 per share given the board’s “lack of meaningful engagement.”

Since that deal was thwarted, Riot has steadily been buying up stock in the firm to become its largest shareholder. As things stand, Riot owns about 19.9% of Bitfarms, the bitcoin miner confirmed on Tuesday.

In an open letter to Bitfarms shareholders, Riot Executive Chairman Benjamin Yi and CEO Jason Les expressed concern about Bitfarms’ recent governance changes and the proposed acquisition of Stronghold Digital ahead of a special meeting to vote on reconstituting Bitfarms’ board of directors on Oct. 29. 

Riot advocated for further changes to Bitfarms' board, citing a need for independent oversight and better governance practices to enhance shareholder value. Two of Bitfarms’ three co-founders, Emiliano Grodzki and Nicolas Bonta, resigned from the board in recent months. Bitfarms subsequently appointed Fanny Philip to replace Grodzki and Ben Gagnon as CEO and a member of the board to replace Bonta, among other executive leadership changes.

However, while Riot said the changes were a “step in the right direction,” it argued they were “reactive” and “insufficient” to address Bitfarms' governance issues. “Bitfarms needs additional truly independent directors with the experience and expertise to ensure that decisions about the company’s strategy moving forward reflect what is best for all shareholders — not just what is best for legacy directors whose focus is maintaining their own positions,” Yi and Les wrote in the letter.

The executives cited Bitfarms’ “poison pill” strategy as an example of the board’s “defensive posture” and “prioritizing entrenchment over engagement.” In June, Bitfarms adopted its first "poison pill" approach, stating that if an entity accumulated more than 15% of Bitfarms' stake, the company would issue fresh shares, diluting the entity's stake.

Riot was successful in its application to the Ontario Capital Markets Tribunal to cease the plan. However, in July, Bitfarms announced that the board of directors unanimously approved the adoption of a new shareholder rights plan, this time involving the accumulation of 20% or more of the company’s common shares, effective for six months.

The timing of Bitfarms’ acquisition agreement with Stronghold was also cited given the proximity of the special meeting and the price the firm is willing to pay — which Riot says represents a greater than 100% premium to Stronghold’s closing share price on the day prior to the announcement and is not in the best interests of Bitfarms’ shareholders.

They additionally criticized Bitfarms’ appointment of Philip without consulting Riot, now its largest shareholder, and what they perceive to be a “continued lack of engagement” with Riot generally.

However, given the changes already made, Riot said it would reduce its proposed new independent directors from three to two at the upcoming special shareholders meeting: Amy Freedman and John Delaney, who would replace two current directors — co-founder Andres Finkielsztain and Fanny Philip. Delaney is an expert in government and public affairs with experience in both the public and private sectors, while Freedman is a corporate governance and capital markets expert with over 25 years of experience.

“In particular, Mr. Finkielsztain, as one of the three co-founders, bears responsibility for, among other things, Bitfarms’ botched CEO succession process that led to it having five CEOs in five years,” Yi and Les said. “We sincerely hope that Bitfarms will allow its shareholders to have their say, and will not seek to take any steps that adversely affect investors or that are intended to gain an unfair advantage in the director election.”

Bitfarms did not immediately respond to a request for comment from The Block.