Riot, which owns nearly 20% of Bitfarms’ shares, is pushing for immediate changes, accusing the company’s board of failing to act in the best interests of its shareholders. This dispute is heating up just as the companies prepare for a critical shareholder meeting scheduled for October 29.

Riot Platforms’ Concerns Over Bitfarms’ Leadership

Riot Platforms has voiced serious concerns about recent actions taken by Bitfarms’ leadership. The company is unhappy with recent board decisions, including the reshuffling of its directors and a controversial acquisition deal. Riot argues that these moves are more about consolidating power within the current board rather than genuinely improving the company’s performance or shareholder value.

Recent Leadership Changes at Bitfarms

Bitfarms has undergone several leadership changes in recent months. Notably, Emiliano Grodzki and Nicolas Bonta, two of the company’s co-founders, have stepped down from their positions. New faces on the board include Fanny Philip and Ben Gagnon, who have been appointed to key roles. Riot Platforms sees these changes as insufficient and merely a reaction to external pressure rather than a genuine effort to address deeper governance issues.

Controversial Poison Pill Strategy

A major point of contention is Bitfarms’ attempt to introduce a “Poison Pill” strategy. This plan was designed to make it more difficult for any party to acquire a significant stake in the company by setting a 15% ownership threshold. Riot Platforms opposed this move, arguing that it was a defensive tactic aimed at protecting the board’s positions rather than benefiting shareholders. The Ontario Capital Markets Tribunal ultimately invalidated this plan, a decision Riot welcomed as it was seen as a protective measure for shareholder interests.

Acquisition of Stronghold Digital Mining

Riot Platforms has also criticized Bitfarms for its decision to acquire Stronghold Digital Mining for $175 million, including $50 million in assumed debt. Riot questions both the timing and the valuation of this acquisition, suggesting that it might be more about strengthening the current board’s position rather than creating value for shareholders. The acquisition price, which is higher than typical premiums for similar deals, has raised concerns about its financial logic.

Proposed Board Reforms

In response to these issues, Riot Platforms has proposed adding two independent board members, Amy Freedman and John Delaney. Riot believes that these nominees have the expertise needed to improve Bitfarms’ governance. Freedman and Delaney are seen as capable of bringing valuable experience in corporate governance and oversight, which Riot argues is essential for steering the company towards a more shareholder-focused approach.

Concerns Over CEO Turnover

Another issue highlighted by Riot Platforms is Bitfarms’ high CEO turnover rate. The company has had five different CEOs in the past five years, leading to concerns about leadership stability and strategic direction. Riot Platforms believes that the proposed new board members could help address these issues and provide the needed stability.

Call for Fair Treatment of Shareholders

As the shareholder meeting approaches, Riot Platforms is urging Bitfarms to avoid any financial maneuvers that could negatively impact shareholders. Riot fears that the current board might pursue actions that could entrench their positions at the expense of shareholder value. Riot has pledged to hold the board accountable if it takes steps that undermine the integrity of the upcoming election.

Bitfarms’ Operational Achievements

Despite the ongoing governance issues, Bitfarms has continued to perform well operationally. The company reported a 21% increase in Bitcoin production for June 2024, even after the halving event that reduced block rewards. Additionally, Bitfarms has achieved a 96% increase in its installed hashrate compared to the previous year and plans to expand its mining capacity significantly by 2025.

Looking Ahead: What’s Next for Bitfarms?

The ongoing dispute between Riot Platforms and Bitfarms is highlighting important issues related to corporate governance and shareholder rights. As the October 29 meeting approaches, the outcome could lead to significant changes in Bitfarms’ leadership and strategy. The industry will be closely watching to see how Bitfarms addresses these challenges and whether it can align its strategies with the interests of its shareholders.

Conclusion

Riot Platforms’ push for reform at Bitfarms underscores the importance of effective governance in maintaining investor confidence and ensuring long-term success. The outcome of this dispute will likely shape the future direction of Bitfarms and influence how other companies approach governance and shareholder engagement. As the situation unfolds, it will be crucial to observe how Bitfarms navigates these challenges and whether it can implement the changes needed to address its governance issues.