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Stronghold’s stock has plummeted by almost 60% this year, Riot decreased by 48%, and Bitfarms plunged by 19%.
Canadian-based Bitcoin mining firm Bitfarms Ltd (TSE: BITF) has announced its intention to buy Stronghold Digital Mining Inc (NASDAQ: SDIG) for about $125 million. According to a Bloomberg report, Bitfarms will make payments via a stock deal and assume a debt of about $50 million.
Terms of the Bitfarms Purchase Deal
Under the deal, shareholders with a stake in Stronghold will be given 2.52 Bitfarms shares for each share held. This represents a premium of approximately 70% of Stronghold’s 90-day volume-weighted average price on Nasdaq as of August 6.
Through the acquisition, Bitfarms aims to expand beyond its present capacity as the industry confronts a potential revenue crunch following the April Bitcoin halving event. Stronghold, which has its power generation and interconnection to local grids, will provide more power for Bitfarms to mine more Bitcoin.
As a reminder, the Bitcoin halving event usually occurs every four years, resulting in a 50% reduction in miners’ incentives. Miners usually find the business less profitable, with each halving if prices stay the same.
Drawing on this, miners seek new ways to enhance their Bitcoin production to stay competitive. Some need to increase their mining capacity, while others require facilities and equipment maintenance. Bitcoin miners create new coins using computers on the network to verify and process transactions in exchange for rewards.
Stronghold revealed in May that it was contemplating a sale and other possibilities. The company, headquartered in Kennerdell, Pennsylvania, uses waste coal combustion to produce electricity for mining purposes. This sustainable approach has set the firm apart, further making it more attractive as an alternative to Bitfarms.
As of this writing, shares of Stronghold have increased by 63% in the pre-market to $4.78. Despite $19.1 million in revenue, the company reported a $21.3 million loss for the second quarter of 2024. On the other hand, Bitfarms is well positioned to acquire Stronghold, with its $41.5 million in revenue in the second quarter.
Bitfarms Forms Defense Against Riot
Bitfarms acquisition deal for Stronghold comes shortly after a takeover attempt from Riot Platforms Inc (NASDAQ: RIOT), another well-known Bitcoin miner. In June, Riot, which has nearly 19% ownership in Bitfarms, made an unsolicited $950 million offer to purchase the company.
In response to the takeover attempt, Bitfarms adopted a “poison pill” defense strategy to prevent hostile takeovers. However, the Ontario Capital Markets Tribunal ordered Bitfarms to cease the strategy. Riot has further intensified its Bitfarms acquisition strategy by buying 10 million additional shares of the firm, according to a report from Coinspeaker.
Riot remains one of the world’s largest Bitcoin mining companies, with facilities in Texas. Bitfarms’ operations are spread across the world, including South America.
Stronghold’s stock has plummeted by almost 60% this year, Riot decreased by 48%, and Bitfarms plunged by 19%. Within the same time frame, Bitcoin increased by 42% to trade at $59,532.
