Key Takeaways
- Riot Platforms has agreed to suspend its attempt to take over Bitfarms.
- Since May 2024, Riot has more than doubled its stake in Bitfarms to nearly 20%.
- Tension between the two companies reflects concerns over the long-term sustainability of small and medium-sized Bitcoin miners.
Almost immediately after the most recent Bitcoin halving, mining giant Riot Platforms started maneuvering to take over its smaller rival, Bitfarms.
After months of buying up shares in Bitfarms, Riot has now agreed to cool its aggressive acquisition strategy. However, more post-halving consolidation could be on the horizon.
Riot’s Hostile Takeover Attempt
Within weeks of the 2024 Bitcoin halving, Riot announced that it had accumulated a 9.25% share in Bitfarms, making it the largest shareholder. The larger company made an unsolicited offer to acquire Bitfarms for $2.30 per share, equivalent to $950 million in total equity value. But the board rebuffed this proposal.
By June, Riot’s stake had risen to 14.9% as the firm moved to requisition a special meeting of Bitfarms’ shareholders in a bid to oust its leadership.
Since then, Riot has bought even more Bitfarm common stock, increasing its stake to 19.9%.
A Temporary Truce
In a joint announcement on Monday, Sept. 23, Riot and Bitfarms revealed that they have reached a “standstill agreement” that will prevent Riot from attempting a takeover again between now and Bitfarms’ 2026 annual board meeting.
Riot has succeeded in forcing out Andrés Finkielsztain, who will be replaced on the board of directors by Amy Freedman. The board shakeup comes a month after Bitfarms Co-Founder and Chair Nicolas Bonta stepped down.
In the June requisition, which has now been withdrawn, Riot said: “Bonta and Finkielsztain bear direct responsibility for the Bitfarms Board’s poor corporate governance practices and consistent inability to realize Bitfarms’ full potential.”
As part of the settlement, Riot has agreed to limit its stake in Bitfarms to a maximum of 20%.
“This agreement represents a significant step to advance shareholder value creation at our respective companies,” commented Riot CEO Jason Les. “We are pleased to have reached this constructive resolution with Bitfarms. As Bitfarms’ largest shareholder, we look forward to supporting a reconstituted Bitfarms Board and continued engagement with management.”
Post-Halving Miner Consolidation
With one of the world’s largest miners attempting to snap up smaller rivals, the tension between Riot and Bitfarms evokes a sense of deja vu.
After the 2016 halving, the reduced Bitcoin rewards contributed to the collapse of GigaWat and Sweden’s KnCMiner.
Similar fears over miners’ long-term sustainability also emerged after the 2020 halving. Back then, a strong post-halving bull run initially kept major upsets at bay. But when things turned bearish in 2022, two of the biggest players in the game, Core Scientific and Compute North, were forced to declare bankruptcy.
There haven’t been any casualties yet in 2024. However, mining companies that have made it this far are already sizable operations consisting of massive data centers that measure their hash rate in petahashes (one petahash equals a quadrillion hashes per second).
While Bitcoin mining can be lucrative, given the huge investments required to make it worthwhile, few miners are currently profitable in real terms.
In its most recent quarterly financial statement, Riot reported net losses of $84.4 million. The world’s largest miner, Marathon Digital, posted losses of $199.7 million.
Although such numbers are characteristic of any frontier technology industry, they make further consolidation likely as small and medium-sized miners like Bitfarms struggle under the costs of competing.
Bitcoin Miners Pivot to AI
With profitability concerns weighing on the Bitcoin mining sector, some miners have moved to repurpose their hardware for AI.
Although the ASIC chips typically used by Bitcoin miners are tailor-made for one purpose, the cooling systems, and energy infrastructure can be adapted for AI computing.
Firms that have already expanded into AI data center services include Applied Digital and Iris Energy. Meanwhile, Hut8 made its first move in the space in 2022 by acquiring TeraGo’s data center business.
James Morales is CCN’s blockchain and crypto policy reporter. He has been working in the news media since 2020, writing about topics such as payments, banking and financial technology. These days, he likes to explore the latest blockchain innovations and the evolving landscape of global crypto regulation.
With an educational background in social anthropology and media studies, James uses his platform as a journalist to explore how new technologies work, why they matter and how they might shape our future.
