Almost immediately after the halving, Riot Platforms wasted no time in making strategic moves to acquire Bitfarms, aiming to assert its dominance in the industry.
Over the course of several months, Riot steadily acquired shares in Bitfarms, amassing a significant stake. However, they have now agreed to temper their aggressive acquisition strategy, although it is possible that further consolidation may occur in the wake of the halving.
Riot's attempt at a hostile takeover was swift. Shortly after the 2024 Bitcoin halving, they announced their ownership of a 9.25% share in Bitfarms, making them the largest shareholder. With an unsolicited offer of $2.30 per share, totaling a substantial $950 million in equity value, Riot aimed to acquire Bitfarms. However, their proposal was rejected by the board.
Undeterred, Riot persisted and increased their stake to 14.9% in June, making a move to requisition a special meeting of Bitfarms' shareholders in an effort to remove the current leadership.
Continuing their aggressive approach, Riot further purchased common stock in Bitfarms, elevating their stake to 19.9%.
Nevertheless, a temporary truce has been reached. In a joint announcement on September 23rd, Riot and Bitfarms disclosed a "standstill agreement" that prevents Riot from pursuing another takeover attempt until Bitfarms' annual board meeting in 2026.
Riot's efforts led to the removal of Andrés Finkielsztain from the board of directors, with Amy Freedman set to take his place. This board shakeup follows the departure of Bitfarms Co-Founder and Chair Nicolas Bonta a month earlier.
In their withdrawn June requisition, Riot held Bonta and Finkielsztain responsible for poor corporate governance practices and Bitfarms' failure to maximize its potential.
As part of the settlement, Riot has agreed to cap their stake in Bitfarms at a maximum of 20%.
Riot CEO Jason Les expressed satisfaction with the resolution, stating that it represents a significant step towards creating shareholder value. As the largest shareholder of Bitfarms, Riot looks forward to supporting the reconstituted board and maintaining engagement with management.
The tension between Riot and Bitfarms, as one of the world's largest miners seeks to acquire smaller rivals, evokes a sense of familiarity. Similar scenarios unfolded after the 2016 halving, leading to the demise of GigaWat and KnCMiner in Sweden due to reduced Bitcoin rewards.
Concerns over the long-term sustainability of miners resurfaced after the 2020 halving. While a post-halving bull run initially provided stability, the bearish market conditions in 2022 forced Core Scientific and Compute North, two major players, into bankruptcy.
Thus far, no casualties have emerged in 2024. However, surviving mining companies are already substantial operations with colossal data centers boasting hash rates measured in petahashes (one petahash equals a quadrillion hashes per second).
Despite the potential for profitability in Bitcoin mining, the immense investments required make it challenging for miners to achieve real profits. Riot reported net losses of $84.4 million in their most recent quarterly financial statement, while Marathon Digital, the world's largest miner, posted losses of $199.7 million.
These figures, though typical in pioneering technology industries, indicate that further consolidation is likely as small and medium-sized miners like Bitfarms struggle to compete with the costs involved.
To mitigate profitability concerns, some miners have shifted their focus to repurposing their hardware for AI applications. Although ASIC chips used by Bitcoin miners are specialized for specific purposes, cooling systems and energy infrastructure can be adapted for AI computing.
Companies like Applied Digital have already expanded into AI data center services, recognizing the potential for diversification beyond Bitcoin mining.