Riot Platforms, Inc., the largest shareholder of Bitfarms Ltd., issued an open letter today urging Bitfarms to cease what it describes as defensive tactics ahead of a crucial shareholder meeting scheduled for October 29.
Riot, which owns approximately 19.9% of Bitfarms, criticized the recent actions by Bitfarms’ board, including board changes and the proposed acquisition of Stronghold Digital Mining, Inc.
Riot argues that these moves are insufficient and reactive, calling for further board changes to enhance shareholder value.
Riot’s Call for Governance Reforms, Criticized Bitfarm’s Recent Financial and Executive Decisions
Since Riot began its campaign, significant changes have already occurred, including the resignation of Emiliano Grodzki and Nicolas Bonta, two of Bitfarms’ three co-founders, and the appointment of Fanny Philip and Ben Gagnon to the board and executive leadership roles, respectively.
However, Riot contends these changes are merely reactive responses to its pressure and fail to address the deeper governance issues at Bitfarms.
Riot outlined several specific grievances, accusing Bitfarms of prioritizing board entrenchment over shareholder engagement.
One major point of contention is Bitfarms’ failed attempt to implement a shareholder rights plan, known as the “Poison Pill,” which would have set a 15% threshold, counter to legal and governance standards.
This plan was invalidated by the Ontario Capital Markets Tribunal following Riot’s intervention, a move that Riot believes protected shareholders from a detrimental precedent in the Canadian capital markets.
Riot also criticized Bitfarms for unilaterally appointing Fanny Philip to the board without consulting Riot, despite its status as the largest shareholder and its proposal of a slate of qualified director nominees.
Furthermore, Riot expressed significant concerns over Bitfarms’ decision to acquire Stronghold Digital Mining for $175 million, including $50 million in assumed debt.
Riot questioned the timing and valuation of this acquisition, suggesting it was designed to entrench the current board rather than serve the best interests of shareholders.
The acquisition price represented a substantial premium over Stronghold’s market value. It deviated from typical premiums observed in similar transactions, prompting Riot to urge a reassessment of the deal’s strategic and financial rationale.
Riot Proposed Change of Directors
Looking ahead, Riot has proposed the election of two independent and highly qualified nominees, Amy Freedman and John Delaney, to replace current Bitfarms directors Andres Finkielsztain and Fanny Philip.
Riot argues that adding Freedman and Delaney would bring critical expertise in corporate governance, public company board experience, and transaction oversight necessary for steering Bitfarms toward a more shareholder-focused strategy.
Riot specifically pointed to Mr. Finkielsztain’s role in Bitfarms’ problematic CEO succession, which has seen the company undergo five CEOs in as many years.
Riot’s letter also implored Bitfarms to refrain from engaging in financing transactions before the shareholder meeting, cautioning that such moves could be unfairly dilutive to shareholders.
Riot expressed concerns that the current board might pursue actions that entrench their positions at the expense of shareholders’ interests, vowing to hold the directors accountable if they take steps that undermine the integrity of the upcoming election.
Riot’s message to Bitfarms’ shareholders is clear: the company needs to halt its defensive tactics and allow shareholders to have their voices heard at the upcoming special meeting.
Notably, earlier this year, Bitfarms reported a 21% increase in Bitcoin production for June 2024 despite the halving event that cut block rewards by 50%.
The company also achieved a 96% year-on-year increase in its installed hashrate and announced plans to expand its mining capacity to 21 EH/s by the end of 2024 and over 35 EH/s by 2025.
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