Riot Platforms, a leading Bitcoin mining company, has increased its ownership stake in competitor Bitfarms to 12%. This announcement was made on June 5, 2024, during a time of considerable market volatility and following a contentious report by short seller Kerrisdale Capital.
Riot Platforms disclosed the acquisition of 1,460,278 common shares of Bitfarms, purchased at an average price of $2.45 per share, amounting to roughly $3.58 million. This transaction boosted Riot's stake from 11.63% to an even 12% of Bitfarms' outstanding shares.
The company aims to call a special meeting of Bitfarms' shareholders to propose the nomination of several independent directors to the board. Riot Platforms has expressed dissatisfaction with the current board's performance and corporate governance at Bitfarms.
Simultaneously, Kerrisdale Capital, an investment management firm, released a report on Riot Platforms, predicting its collapse and criticizing the Bitcoin mining sector at large. The report accused Riot of engaging in energy arbitrage and stock issuance rather than creating shareholder value. Kerrisdale's social media posts announced a "war against Bitcoin miners," causing a stir within the Bitcoin community and leading to a sharp 9.6% decline in Riot's stock price in early trading on the day of the report's release.
Today, we launch a war against bitcoin miners, an industry of snake oil salesmen that are incinerating both investor capital and the environment and should be banished from America much like the Chinese RTO frauds that we helped kick out a decade ago (1/10)
— Kerrisdale Capital (TradFi) (@KerrisdaleCap) June 5, 2024
However, Riot Platforms' share price recovered slightly following the news of its increased stake in Bitfarms, closing down just 0.21% from the previous day at $9.65. It has since climbed to $10.35.
This move comes after Riot's failed $950 million bid to acquire all of Bitfarms' shares, which Bitfarms rejected as undervaluing the company. Riot's subsequent action to increase its stake and influence Bitfarms' governance reflects a broader strategy to consolidate its position in the competitive Bitcoin mining industry.
Riot Platforms has filed an Early Warning Report as required by Canadian securities laws, ensuring transparency about its investment activities. The company has reiterated its concerns about Bitfarms' governance practices and plans to nominate independent directors to address these issues and influence the strategic direction of Bitfarms.
