On Tuesday, Riot Platforms (NASDAQ:RIOT), a prominent player in the cryptocurrency mining sector, reiterated its intention to acquire Bitfarms Ltd. (NASDAQ:BITF) with an offer of $2.30 per share. This proposal marks a 14% premium over Bitfarms' closing share price on Friday and reflects a strategic move by Riot to expand its influence and operations within the industry.
Riot Platforms, which has become the largest shareholder of Bitfarms with a 9.25% stake, initially presented the acquisition proposal on April 22, but it was rejected by Bitfarms' board without any substantial discussions. Riot is now pushing for a special meeting to propose independent directors for the Bitfarms board, signaling its commitment to effect change in the company's governance.
The suggested acquisition, valued at $950 million in total equity value, would position Riot as a diversified powerhouse in the cryptocurrency mining space. The deal would combine Riot's Texas-based operations with Bitfarms' facilities in Canada, Argentina, and Paraguay. According to B.Riley's analysis, this diversification is seen as a key benefit of the potential merger.
The transaction, which would be paid in a mix of cash and Riot stock, attributes Bitfarms an enterprise value multiple of 7.8 times its estimated 2025 EBITDA. B.Riley's evaluation assumes a future Bitcoin price and network hash rate of $60,000 and 684 EH/s, respectively. Bitfarms would hold a 17% stake in the merged entity.
Riot Platforms is advocating for a new direction in Bitfarms' leadership and has expressed concerns over the current governance of the company. The proposed changes are expected to be brought forward at a special meeting following Bitfarms' Annual General Meeting on May 31.
Riot's strategic push for acquisition and governance reform underscores its bullish stance on the future of mergers and acquisitions within the cryptocurrency mining industry.
InvestingPro Insights
As Riot Platforms (NASDAQ:RIOT) continues its pursuit to acquire Bitfarms Ltd. (NASDAQ:BITF), investors are closely monitoring RIOT's financial health and market performance. According to InvestingPro data, Riot Platforms holds a market capitalization of approximately $3.07 billion and maintains a P/E ratio of 14.86, with an adjusted P/E ratio for the last twelve months as of Q1 2024 at 21.91. This valuation is complemented by a revenue growth of 13.51% over the same period, indicating a solid trajectory in the company's financials.
InvestingPro Tips suggest that while Riot has more cash than debt on its balance sheet and analysts anticipate sales growth in the current year, the company is also quickly burning through cash and suffers from weak gross profit margins.
These factors are critical for investors to consider, especially in the volatile cryptocurrency mining sector. Moreover, the company's stock price has experienced significant volatility, with a 33.74% drop over the last three months, which may be of interest to value investors looking for entry points.
For those considering a deeper analysis of Riot Platforms' financial outlook and strategic direction, InvestingPro offers additional tips and metrics. By using the coupon code PRONEWS24, readers can receive an extra 10% off on a yearly or biyearly Pro and Pro+ subscription, unlocking further insights into RIOT's performance and future potential.
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