425: Bitfarms Responds to Riot's Misleading Claims, Reaffirms Commitment to Value Creation Amidst Stronghold Acquisition

Bitfarms issues a statement addressing Riot Platforms' misleading claims and reiterates its commitment to value creation, particularly through the proposed acquisition of Stronghold Digital Mining.

Summary

• Bitfarms has responded to Riot Platforms' amended requisition proposal, dismissing Riot's claims as misleading.
• Bitfarms asserts that Riot is attempting to acquire the company at a discounted price, benefiting Riot's shareholders at the expense of Bitfarms' shareholders.
• The company defends its recent board and leadership changes as independent decisions made to enhance shareholder value, not influenced by Riot.
• Bitfarms highlights its proposed acquisition of Stronghold Digital Mining, which aims to diversify power access and rebalance the energy portfolio towards the U.S.
• The Stronghold transaction could add up to 307 MW of power capacity, potentially increasing Bitfarms' energy portfolio to over 950 MW by the end of 2025, with nearly 50% in the U.S.
• Bitfarms emphasizes its commitment to delivering exceptional value in both the near and long term.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While the company defends its position against Riot and highlights the potential benefits of the Stronghold acquisition, there are also risks and uncertainties associated with the transaction and the overall market.

Positives

• Bitfarms is actively working to enhance shareholder value through strategic acquisitions and internal improvements.
• The proposed acquisition of Stronghold Digital Mining could significantly increase Bitfarms' power capacity and diversify its energy sources.
• Bitfarms is focused on expanding its presence in the U.S. market.
• The company's proprietary data analytics system delivers best-in-class operational performance and uptime.

Negatives

• Bitfarms is currently engaged in a dispute with Riot Platforms, which could create uncertainty and potentially distract management.
• The company accuses Riot of attempting to acquire Bitfarms at a discounted price.
• The Stronghold acquisition is subject to shareholder and regulatory approvals, and may not be completed as anticipated.

Risks

• The Stronghold acquisition is subject to various risks, including shareholder and regulatory approvals, and may not close on the anticipated terms or at all.
• The letter of intent for the 10 MW site in Sharon is subject to entering into a definitive lease agreement and TSX approval, none of which is assured.
• The power purchase agreements and economics thereof may not be as advantageous as expected.
• Potential environmental costs and regulatory penalties due to the operation of the Stronghold plants which entail environmental risk.
• The digital currency market is volatile, and a decline in digital currency prices could negatively impact operations.
• The inability to maintain reliable and economical sources of power to operate cryptocurrency mining assets.
• The risks of an increase in electricity costs, cost of natural gas, changes in currency exchange rates, energy curtailment or regulatory changes in the energy regimes in the jurisdictions in which Bitfarms and Stronghold operate and the potential adverse impact on profitability.

Future Outlook

Bitfarms aims to increase its energy portfolio to over 950 MW by the end of 2025, with nearly 50% in the U.S., through the Stronghold acquisition and other strategic initiatives.

Management Comments

• The upcoming special meeting is not about corporate governance, as Riot has repeatedly positioned it to be, but rather about Riot attempting to acquire Bitfarms at a discounted price for the benefit of Riot shareholders, not Bitfarms shareholders.
• The recent Board and leadership changes that Bitfarms has implemented were made independently of Riot, on behalf of all of our shareholders, to ensure the right team is in place to enhance shareholder value at Bitfarms, not for Riots benefit and approval.
• The Board and management team are focused on the tremendous value-enhancing opportunity this transaction presents for Bitfarms and our shareholders.
• We remain steadfast in our commitment to delivering exceptional value in the nearand long-term.

Industry Context

The announcement reflects the ongoing consolidation and competition within the Bitcoin mining industry, with companies like Riot Platforms seeking to expand their operations through acquisitions. Bitfarms' response highlights the strategic importance of maintaining independence and maximizing shareholder value in this competitive landscape.

Comparison to Industry Standards

• Bitfarms' focus on increasing its power capacity to over 950 MW by the end of 2025 is comparable to other major players in the Bitcoin mining industry, such as Marathon Digital Holdings and Core Scientific, which are also investing heavily in expanding their mining infrastructure.
• The target of having nearly 50% of its energy portfolio in the U.S. aligns with the trend of Bitcoin mining companies seeking to establish a stronger presence in North America due to its relatively stable regulatory environment and access to diverse energy sources.
• The company's proprietary data analytics system is similar to other companies that are using data analytics to improve operational efficiency and uptime.

Stakeholder Impact

• Shareholders: The outcome of the dispute with Riot Platforms and the success of the Stronghold acquisition will directly impact shareholder value.
• Employees: The acquisition could lead to integration efforts and potential changes in roles and responsibilities.
• Customers: The company's ability to maintain reliable and efficient mining operations is crucial for its customers.
• Suppliers: The company's expansion plans could create new opportunities for suppliers of mining equipment and energy.

Next Steps

• The Board will consider and respond to Riots amended requisition proposal in due course.
• Shareholders are advised that no action is required at this time.
• Bitfarms intends to file with the SEC a registration statement on Form F-4, which will include a proxy statement of Stronghold that also constitutes a prospectus of Bitfarms.

Key Dates