F-10/A: Bitfarms Amends Shelf Prospectus, Eyes Potential $375 Million Capital Raise

Bitfarms updates its shelf prospectus, potentially paving the way for raising up to US$375 million through various securities offerings.

Summary

• Bitfarms Ltd. has filed an amendment to its short form base shelf prospectus, indicating a potential offering of up to US$375 million in securities.
• The securities may include common shares, warrants, subscription receipts, units, debt securities, and share purchase contracts.
• These securities can be offered separately or together, with terms determined by market conditions at the time of sale.
• The company may use these securities as consideration for acquisitions of other businesses, assets, or securities.
• The common shares are listed on Nasdaq and the TSX under the symbol BITF.
• As of November 9, 2023, the closing prices were C$1.66 on the TSX and US$1.20 on Nasdaq.
• The document highlights risks associated with investing in Bitfarms securities, including cryptocurrency price volatility, regulatory changes, and operational challenges in emerging markets.
• The company's registered office is located in Toronto, Ontario.
• The document incorporates by reference several filings with Canadian securities commissions and the SEC, including the 2022 Annual Information Form, audited financial statements, and management's discussion and analysis.
• The company's estimated working capital at September 30, 2023, is approximately $54.0 million.
• The company estimates cash operating expenditures of approximately $148.8 million for the next 12 months.
• The company earned 398 Bitcoin in October 2023, with a value of approximately $11.8 million.
• The company's planned capital expenditures over the next 18 months are anticipated to be approximately $100 million to $300 million.
• The company may raise an additional approximately $80.5 million from the exercise of outstanding warrants to purchase Common Shares.
• The company may utilize debt facilities from existing and new lenders as well as borrowing against, or if necessary, liquidating, its Bitcoin inventory.

Sentiment

Score: 6

Explanation: The document presents a mixed sentiment. While it highlights the potential for growth and expansion, it also emphasizes the significant risks associated with investing in Bitfarms, including cryptocurrency price volatility and regulatory uncertainty. The company's reliance on raising additional capital and the potential for dilution also contribute to a neutral sentiment.

Positives

• Bitfarms has the potential to raise significant capital (up to US$375 million) to fund its operations and expansion plans.
• The company has multiple options for raising capital, including issuing various types of securities and utilizing debt facilities.
• The company's existing operations are contributing positively to its working capital position.
• The company has contracts securing green energy in Quebec, Paraguay, and Washington.
• The company has a permit in place to draw up to 100 MW of the 210 MW from a private energy supplier in Argentina.

Negatives

• Investing in Bitfarms securities is highly speculative and involves significant risks.
• The company's profitability is significantly affected by changes in the spot price of cryptocurrencies, which are highly volatile.
• The company may need to raise additional capital in the future to fund more rapid expansion.
• The company's planned capital expenditures over the next 18 months are anticipated to be approximately $100 million to $300 million, which exceed the company's current working capital position and expected contributions to working capital from the company's existing operations.
• The company is exposed to fluctuations in currency exchange rates which could negatively affect our financial condition and results of operations.

Risks

• The company faces risks related to the valuation and price volatility of cryptocurrencies.
• The company may experience share price fluctuations.
• The company may face uncertainty of additional financing and dilution.
• The company has indebtedness.
• The company is subject to global financial conditions.
• The company may be impacted by the possibility of Bitcoin mining algorithms transitioning to proof of stake validation.
• The company is subject to debt covenants.
• The company has a limited operating history.
• The company may face challenges with employee retention and growth.
• The company is subject to cybersecurity threats and hacking.
• The company is subject to risk related to technological obsolescence and difficulty in obtaining hardware.
• The company is subject to cryptocurrency network difficulty and impact of increased global computing power.
• The company is economically dependent on regulated terms of service and electricity rates risks.
• The company is subject to increases in commodity prices or reductions in the availability of such commodities.
• The company is subject to fraud and failure of cryptocurrency exchanges, custodians and other trading venues.
• The company is subject to insolvency, bankruptcy, or cessation of operations of mining pool operator.
• The company is subject to independent mining risks.
• The company is subject to indemnification of mining pool.
• The company is reliant on foreign mining pool operator.
• The company is subject to mining pool agreements governed by foreign laws.
• The company is reliant on manufacturing in foreign countries and the importation of equipment to the jurisdictions in which the company operates.
• The company is subject to political and regulatory risk.
• The company is subject to permits and licenses.
• The company is subject to server failures.
• The company is subject to tax consequences.
• The company is subject to environmental regulations.
• The company is subject to environmental liability.
• The company is subject to erroneous transactions and human error.
• The company is subject to facility developments.
• The company is subject to competition.
• The company is subject to acceptance and/or widespread use of cryptocurrency is uncertain.
• The company is subject to hazards associated with high-voltage electricity transmission and industrial operations.
• The company is subject to adoption of ESG practices and the impacts of climate change.
• The company is subject to corruption.
• The company is subject to US Foreign Corrupt Practices Act and Similar Legislation.
• The company is subject to political instability.
• The company is subject to third-party supplier risks.
• The company is subject to potential of Bitfarms being classified as a passive foreign investment company.
• The company is subject to pandemic and infectious disease risk (including COVID-19).
• The company is subject to emerging market risks.
• The company is subject to economic volatility and other challenges in Argentina and/ or Paraguay.
• The company is subject to vulnerability of Argentina and Paraguay economies to external shocks.
• The company is subject to impacts of corruption and anti-corruption laws in operating locations.
• The company is subject to unpredictability of tax rates, capital controls and foreign exchange restrictions in Argentina.
• The company is subject to discretion over use of proceeds.
• The company is subject to absence of a public market for certain of the securities.
• The company is subject to unsecured debt facilities.
• The company is subject to effect of changes in interest rates on debt securities.
• The company is subject to effect of fluctuations in foreign currency markets on debt securities.
• The company is subject to trading price of common shares and volatility.

Future Outlook

The Company expects to use the proceeds raised in offerings under this prospectus to fund the acquisition and buildout of mining and data centre infrastructure and to procure new Miners to achieve its March 31, 2024, hashrate goal of at least 7.0 Exahash/second (EH/s) as well as future growth, performance, and efficiency objectives.

Industry Context

The document provides insight into the operations and financial strategy of a publicly traded Bitcoin mining company, a sector known for its volatility and dependence on cryptocurrency market dynamics. The company's expansion plans and reliance on green energy sources reflect broader industry trends towards sustainability and geographic diversification.

Comparison to Industry Standards

• The document mentions that in 2022 Bitfarms ranked among the cost-effective publicly trade BTC mining companies, relying on data from www.theminermag.com.
• The document references the Implied Cost of Bitcoin Production from Proprietary Hashrate, being the absolute cost of producing Bitcoin, denominated in United States dollars.
• The document references the Estimated Gross Margin of Proprietary Bitcoin Hashrate Activities.

Management Changes

Stakeholder Impact

• Shareholders: Potential dilution from new share issuances, but also potential for increased value through successful expansion.
• Employees: Potential for job creation and growth within the company.
• Customers: No direct impact as Bitfarms primarily sells computational power to Mining Pools.
• Suppliers: Potential for increased business through expansion of mining operations.
• Creditors: Potential for increased debt financing and associated risks.

Next Steps

• The company intends to use the net proceeds from the sale of our securities for general corporate purposes including funding ongoing operations and/or working capital requirements, placing deposits and guarantees as required by energy providers, repaying indebtedness outstanding from time to time, completing acquisitions and mergers to increase mining capacity, expanding existing mining operations and for other corporate purposes as set forth in the prospectus supplement relating to the offering of the securities.
• The company expects that it will be necessary to complete the installation of the 20 MW of hydro containers and procure Miners for those containers at the Paso Pe facility in Paraguay.
• The company plans to continue to retain some or all of the Bitcoin it earns throughout 2023 and 2024.

Key Dates

Keywords

Bitfarms, securities, cryptocurrency, Bitcoin, mining, prospectus, offering, capital, hashrate, debt