Analysts from H.C. Wainright believe that Riot’s acquisition of Bitfarms will likely face rejection due to Bitfarm’s board disapproval and insufficient premiums.

According to H.C. Wainwright, Bitfarm’s board has already rejected Riot’s initial offer, stating that the proposed premium is inadequate to attract shareholder approval. Lead analyst Mike Colonnese noted, “The premium is not high enough to compel Bitfarm shareholders to agree to the deal given the deep valuation discount at which shares currently trade.” He also mentioned that this is a non-binding proposal, and no definitive agreement has been reached.

Riot plans to request a special meeting of Bitfarm’s shareholders at the annual shareholder meeting on Friday to discuss appointing new independent directors. Over the next four months, Riot aims to nominate new directors to gain board approval for the acquisition, Colonnese added.

Riot’s board unanimously supports the acquisition and has the resources to execute the transaction. As of April 30, Riot had over $700 million in cash and 8,872 unencumbered Bitcoin (BTC) on its balance sheet.

Acquisition Offer

On May 28, crypto-mining company Riot announced an acquisition offer to Bitfarms (BITF). The offer was for all BITF shares at $2.3 per share, totaling the acquisition at $950 million.

Riot’s proposal includes a mix of cash and common stock, a structure that could be beneficial for Bitfarms shareholders. This arrangement would allow them to retain ownership of up to around 17% of the merged company, potentially providing them with a stake in a larger, more diversified entity.

Prior Proposals

In April, Bitfarm rejected Riot’s proposal to acquire the company. Any potential transaction’s final terms and conditions would require approvals from both Bitfarm’s and Riot’s Boards. The rejection occurred quickly and “without engaging in substantive dialogue.”

We are deeply concerned that the founders on the Bitfarms board — Nicolas Bonta and Emiliano Grodzki — may not be acting in the best interests of all Bitfarms shareholders,” said Riot CEO Jason Les.

Riot’s current price is $10.34, and it has a “Buy” rating with a price target of $17.00 per share.

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