Bitfarms, a prominent player in the Bitcoin mining sector, has announced its acquisition of Stronghold Digital Mining for approximately $125 million, a deal that includes the assumption of about $50 million in debt. This significant transaction marks a pivotal expansion for Bitfarms, adding up to 307 megawatts (MW) of power capacity. This increase is set to elevate Bitfarms’ total energy capacity to over 950 MW by the end of 2025, positioning the company for substantial growth in the cryptocurrency mining industry.
Transaction Details and Shareholder Impact
Under the terms of the acquisition, Stronghold shareholders will receive 2.52 shares of Bitfarms for each share of Stronghold they hold. This exchange represents a consideration per share of $6.02, translating to a 71% premium over Stronghold’s 90-day volume-weighted average price on Nasdaq as of August 16. Post-transaction, Stronghold shareholders are expected to own just under 10% of the combined entity, based on the current issued and outstanding shares of each company.
The announcement was well-received in the financial markets, with shares of Stronghold surging about 55% in Nasdaq pre-market trading to $4.55. This positive response reflects investor confidence in the strategic merits of the acquisition. However, it’s noteworthy that Bitcoin mining companies, including Bitfarms, have been navigating challenges such as reduced mining rewards following the Bitcoin halving and pressures from existing debt burdens and previous management decisions. Stronghold had also been contemplating a sale to alleviate financial pressures, having filed a registration statement in April to potentially sell up to $250 million in securities.
Ben Gagnon, CEO of Bitfarms, expressed his satisfaction with the deal, which followed three years of discussions. He highlighted the transaction as a transformative step for Bitfarms, enhancing the company’s ability to manage and expand its energy resources significantly. Gagnon outlined the strategic goals post-acquisition: “With this transaction, we expect to expand and rebalance our energy portfolio to 950 MW with nearly 50% in the US by the end of 2025 and have visibility on multi-year expansion capacity up to 1.6 GW with approximately 66% in the US.”
Beyond Bitcoin Mining
Looking beyond immediate mining operations, Gagnon discussed plans to diversify Bitfarms’ activities. By integrating vertically with power generation, expanding energy trading capabilities, and securing two high-potential sites for high-performance computing and artificial intelligence, Bitfarms aims to create greater long-term shareholder value. This strategic diversification is intended to strengthen Bitfarms’ position in the broader tech and energy sectors, capitalizing on the growing demand for advanced computing resources.
In the first quarter of 2024, Stronghold reported revenues of $27.5 million, up 27% from the previous quarter and 59% year over year. This revenue included $26.7 million from cryptocurrency operations, with the remaining from the sale of energy and other activities. This performance underscores the operational strengths of Stronghold, which Bitfarms is poised to build upon.
The acquisition of Stronghold Digital Mining by Bitfarms not only expands the latter’s operational capacity but also enhances its strategic positioning within the cryptocurrency and high-performance computing sectors. As Bitfarms integrates Stronghold’s resources and navigates post-acquisition challenges, the focus will be on maximizing efficiencies, scaling operations, and driving innovation to ensure robust growth and value creation for shareholders.
