New Independent Directors Are Necessary to
Fix Bitfarms’ Broken Corporate Governance and to Oversee a Fair
Strategic Alternatives Process
Riot Urges the Bitfarms Board to Ensure
Shareholders Are Heard by Holding the Special Meeting Without
Delay
Riot Withdraws Previous Proposal to Acquire
Bitfarms for US$2.30 Per Share; Stands Ready to Engage with
Reconstituted Bitfarms Board Regarding a Potential
Transaction
Riot Platforms, Inc. (NASDAQ: RIOT) (“Riot”) today announced
that it has requisitioned a special meeting of Bitfarms Ltd.
(NASDAQ: BITF) (“Bitfarms” or the “Company”) shareholders (the
“Special Meeting”) to reconstitute the Bitfarms Board of Directors
(the “Bitfarms Board”). Riot currently owns approximately 14.9% of
Bitfarms, making it Bitfarms’ largest shareholder.
The Special Meeting will give Bitfarms shareholders the
opportunity to vote on the removal of Bitfarms Chairman and Interim
CEO Nicolas Bonta and director Andrés Finkielsztain (or their
replacements), and any individual who fills the current vacancy
created by the resignation of co-founder Emiliano Grodzki, who was
voted off the Bitfarms Board at the Company’s most recent Annual
General and Special Meeting of Shareholders. Riot believes that
Messrs. Bonta and Finkielsztain bear direct responsibility for the
Bitfarms Board’s poor corporate governance practices and consistent
inability to realize Bitfarms’ full potential. Riot will also seek
to remove any additional director appointed by the Bitfarms Board
after the date of this press release.
To replace these individuals, Riot has nominated three
exceptional candidates: John Delaney, Amy Freedman and Ralph
Goehring (the “Nominees”). Each of the Nominees is independent of
Riot and Bitfarms and is ideally qualified to help restore
shareholders’ confidence in the Bitfarms Board. Together, the
Nominees will bring needed independence and corporate governance
credentials to the Bitfarms Board, as well as relevant experience
overseeing significant corporate transactions and serving in
executive management and public company director roles.
The bottom line is this: over the course of more than a year of
attempting to engage constructively with the Bitfarms Board
regarding a potential combination of Bitfarms and Riot, it has
become evident to Riot that good faith negotiations simply will not
be possible until there is real change in the Bitfarms boardroom.
The culture of the current Bitfarms Board is founder-driven, and
Riot believes it prioritizes the interests of individual directors
over what is best for Bitfarms and its shareholders. The strategic
review initiated by the Bitfarms Board was a reaction to the public
pressure Riot has placed on the Bitfarms Board and does not address
the core issue: until Bitfarms shareholders can truly have their
voices heard and fresh perspectives are considered, the fundamental
and deep-seated problems that have plagued the Company will
continue.
Why Board Change Is Needed Now at
Bitfarms
Shareholders should consider the following:
- Bitfarms once again botched its CEO succession process –
Bitfarms announced in March that it planned to seek a replacement
for its CEO and President at the time, Geoffrey Morphy, but that he
would lead Bitfarms until a replacement could be identified. Then,
on May 13, Bitfarms abruptly announced Mr. Morphy had been
terminated immediately after he filed a $27 million lawsuit against
Bitfarms. The sudden termination of the Bitfarms CEO without a
transition plan in place at a crucial period of execution for
Bitfarms and the industry, as well as the lawsuit allegations –
which, if accurate, raise serious questions about whether certain
directors are committed to acting in the best interests of all
Bitfarms shareholders – represent a dangerous failure of leadership
by the current Bitfarms Board. This was not an isolated occurrence:
Mr. Morphy was the fourth Bitfarms CEO in five years. The ability
to effectively identify, recruit and oversee a CEO is a fundamental
duty of a board, and is essential to a well-functioning company’s
performance. The persistent and inarguable
inability of the Bitfarms Board to adequately manage CEO succession
is a clear indication that change is needed, and, as longtime
directors, Messrs. Bonta and Finkielsztain bear direct
responsibility.
- Bitfarms’ Board has been unwilling to engage constructively
with Riot – Following approximately 13 months of attempting to
meaningfully engage with Bitfarms regarding a potential combination
of Bitfarms and Riot, Riot delivered a private acquisition proposal
to the Bitfarms Board on April 22, 2024. After providing no
constructive response, despite repeated follow up by Riot, the
Bitfarms Board demanded that Riot sign a confidentiality agreement
that included an excessive and off-market standstill of more than
three years and, soon after, advised that the offer was too low,
without any guidance as to what terms it would consider acceptable,
or any other commentary. Since then, Riot has made multiple
attempts to work constructively with Bitfarms toward a mutually
beneficial combination – including sending several private letters
to the Bitfarms Board proposing paths forward. Instead of engaging
in good faith, Bitfarms has responded by implementing a shareholder
rights plan – or “poison pill” – with a 15% trigger that is well
below the customary 20% threshold. The 15% trigger is in direct
conflict with established legal and governance standards, including
those published by leading proxy advisory firms Institutional
Shareholder Services Inc. and Glass, Lewis & Co. Bitfarms’
poison pill sets a dangerous precedent for Canadian boards seeking
to protect their positions at the expense of shareholders, and Riot
will be applying to the Ontario Capital Markets Tribunal to
cease-trade the poison pill. Bitfarms has also made unwarranted and
highly negative attacks against Riot and sought to falsely call
into question Riot’s intentions and objectives. Even after the
adoption of the off-market poison pill, Riot offered the Bitfarms
Board an opportunity to avoid the Special Meeting by jointly
refreshing the Bitfarms Board. Bitfarms rejected this olive branch.
This pattern of behavior reinforces the
entrenched mentality of the current Bitfarms Board and its
unwillingness to act in the best interests of all Bitfarms
shareholders.
- Bitfarms shareholders have lost confidence in their
Board – At Bitfarms’ Annual General and Special Meeting of
Shareholders held on May 31, 2024, Bitfarms shareholders voted by a
significant margin not to re-elect director and co-founder Emiliano
Grodzki to the Bitfarms Board. Further, since Riot made its
proposal public on May 28, Riot has been contacted by numerous
Bitfarms shareholders who have conveyed support for fully exploring
a combination between Riot and Bitfarms. These shareholders have
also expressed a lack of confidence in the ability of the current
Bitfarms Board to properly oversee a strategic alternatives
process, successfully set and guide Bitfarms’ priorities moving
forward and, ultimately, act in the best interests of Bitfarms and
all of its shareholders. Riot is asking that Bitfarms let the views
of its shareholders be heard. Based on the response to Riot’s
public statements on Bitfarms, Riot is
confident it is not alone in believing that Bitfarms’ corporate
governance is broken, and that the status quo cannot be allowed to
continue.
Riot’s Director Nominees Are
Independent, Highly Qualified and Ready to Serve
It is clear that directors with fresh perspectives are needed to
address the issues in the Bitfarms boardroom. Riot is proposing
three highly qualified individuals, each of whom is completely
independent of Riot and Bitfarms. None of these nominees is
receiving any compensation or other financial benefit from Riot or
any of Riot’s advisors, either directly or indirectly, related to
Riot’s requisition of the Special Meeting or in connection with
serving as a nominee or director of Bitfarms. Together, they will
bring much needed corporate governance oversight, transaction
experience and business expertise to the Bitfarms Board:
- John Delaney, a government and public affairs expert
with experience in the public and private sectors who currently
serves as President of Flagler College, Of Counsel at government
relations firm The Fiorentino Group and Of Counsel at law firm
Rogers Towers P.A. Previously, he served in numerous political
roles, including as the Mayor of Jacksonville – the 12th largest
city by population in the United States. John currently serves as a
director on the board of privately-held Main Street America
Insurance (formerly The Main Street America Group), and previously
was on the boards of Jacksonville Bancorp, Inc. (formerly Nasdaq:
JAXB) and Florida Rock Industries, Inc. (formerly NYSE: FRK) – both
of which were successfully acquired. John will bring decades of
public policy and government relations knowledge, which is critical
to the Bitcoin mining industry going forward, as well as crucial
hands-on experience overseeing successful sale processes as a
public company director.
- Amy Freedman, a corporate governance and public capital
markets expert with over 25 years of experience. She is currently
an advisor to Ewing Morris and Co. Investment Partners and to
Longacre Square Partners. Prior to serving as an advisor to Ewing
Morris, Ms. Freedman was a Partner and Head of Engagement Fund
Investing at Ewing Morris. Previously, she was CEO of Kingsdale
Advisors, a leading shareholder services and advisory firm, and
spent over 15 years in capital markets as an investment banker with
global firms including Stifel Financial Corp. (NYSE: SF) and Morgan
Stanley (NYSE: MS). Ms. Freedman is currently a director on the
boards of Mandalay Resources Corporation (TSX: MND, OTCQB: MNDJF),
Irish Residential Properties REIT plc (ISE: IRES) and American
Hotel Income Properties REIT (TSX: HOT.UN, HOT.U). Ms. Freedman is
also currently a director of Canaccord Genuity (TSX: CF), but her
tenure on the board of Canaccord Genuity will end on August 9,
2024, as she is not standing for re-election. She formerly served
on the board of Park Lawn Corporation (TSX: PLC, PLC.U). Amy
will bring decades of experience helping boards improve corporate
governance and evaluate complex M&A transactions and possesses
a unique perspective from having served as both a public company
advisor and director.
- Ralph Goehring, a financial and energy expert with
extensive experience serving as a public company CFO. Ralph is
currently a Business Consultant to Global Clean Energy Holdings,
Inc. (OTCQB: GCEH), where he previously served as CFO, and is also
the founder and CEO of SandDollar Financial, LLC, an accounting
firm that provides outsourced accounting and CFO services.
Formerly, he was the CFO of both Bonanza Creek Energy, Inc. and
Berry Petroleum Company. Ralph is currently President and CEO, and
a board member, of privately-held Black Horse Resources, and
previously served on the board of Strathmore Minerals Corp.
(formerly TSX: STM), which was successfully sold. Ralph will
bring relevant energy industry and executive leadership experience,
as well as extensive public company financial, accounting and tax
expertise – which is integral to any potential M&A
process.
Together, these three individuals possess the right
fit-for-purpose skillsets and experience to be able to objectively
help oversee the strategic alternatives process at Bitfarms – as
well as to help guide Bitfarms forward if the Bitfarms Board
ultimately determines that is the optimal direction for all
Bitfarms shareholders.
Next Steps
The Bitfarms Board should demonstrate respect for the rights of
its shareholders by holding the Special Meeting without delay. Any
gamesmanship or tactics to avoid calling the Special Meeting as
soon as possible will only be further evidence of entrenchment and
a disregard for the will of Bitfarms’ shareholders.
Riot continues to believe that a combination of Bitfarms and
Riot will create the premier and largest publicly listed Bitcoin
miner globally, with geographically diversified operations
well-positioned for long-term growth. Riot remains completely
committed to pursuing a transaction with Bitfarms. However, it is
clear that engaging with the incumbent Bitfarms Board on a
potential combination is just not possible. As a result, Riot has
informed the Bitfarms Board that it has formally withdrawn its
previous proposal to acquire all Bitfarms common shares at a price
of US$2.30 per share and stands ready to engage and negotiate with
a reconstituted Bitfarms Board to pursue a mutually beneficial
combination of Bitfarms and Riot.
Canadian Early Warning
Disclosure
Riot includes the following disclosure pursuant to Part 3 of
Canadian National Instrument 62-103 – The Early Warning System and
Related Take-Over Bid and Insider Reporting Issues and Part 5 of
Canadian National Instrument 62-104 – Take-Over Bids and Issuer
Bids in respect of Bitfarms.
Riot’s early warning report dated June 13, 2024 disclosed that
Riot beneficially owned 57,627,036 common shares in Bitfarms (the
“Common Shares”), representing approximately 14.0% of the
issued and outstanding Common Shares as of June 13, 2024 (as
calculated based on the information most recently provided by
Bitfarms in its material change report dated June 10, 2024). As of
the date hereof, Riot beneficially owns 61,331,631 Common Shares,
representing approximately 14.9% of the issued and outstanding
Common Shares (as calculated based on the information most recently
provided by Bitfarms in its material change report dated June 10,
2024).
Riot intends to review its investment in Bitfarms on a
continuing basis and depending upon various factors, including
without limitation, any discussion between Riot, Bitfarms and/or
the Bitfarms Board and its advisors regarding, among other things,
the requisitioned Special Meeting and/or the composition of the
Bitfarms Board, Bitfarms’ financial position and strategic
direction, overall market conditions, other investment
opportunities available to Riot, and the availability of securities
of Bitfarms at prices that would make the purchase or sale of such
securities desirable, Riot may (i) increase or decrease its
position in Bitfarms through, among other things, the purchase or
sale of securities of Bitfarms, including through transactions
involving the Common Shares and/or other equity, debt, notes, other
securities, or derivative or other instruments that are based upon
or relate to the value of securities of Bitfarms in the open market
or otherwise, (ii) enter into transactions that increase or hedge
its economic exposure to the Common Shares without affecting its
beneficial ownership of the Common Shares or (iii) consider or
propose one or more of the actions described in subparagraphs (a) -
(k) of Item 5 of Riot’s early warning report filed on June 24, 2024
in accordance with applicable Canadian securities laws, including
submitting a revised proposal to acquire Bitfarms.
Riot will file the early warning report in accordance with
applicable securities laws, which will be available under the
Company’s profile at www.sedarplus.ca. The address of Riot is 3855
Ambrosia Street, Suite 301, Castle Rock, CO 80109.
For further information and to obtain a copy of the Early
Warning Report, please see the Company’s profile at
www.sedarplus.ca or contact Phil McPherson, Vice President, Capital
Markets & Investor Relations, at (303) 794-2000 ext. 110.
***
About Riot Platforms, Inc.
Riot’s (NASDAQ: RIOT) vision is to be the world’s leading
Bitcoin-driven infrastructure platform. Our mission is to
positively impact the sectors, networks and communities that we
touch. We believe that the combination of an innovative spirit and
strong community partnership allows Riot to achieve best-in-class
execution and create successful outcomes.
Riot, a Nevada corporation, is a Bitcoin mining and digital
infrastructure company focused on a vertically integrated strategy.
Riot has Bitcoin mining operations in central Texas and electrical
switchgear engineering and fabrication operations in Denver,
Colorado.
For more information, visit www.riotplatforms.com.
Cautionary Note Regarding Forward Looking Statements
Statements contained herein that are not historical facts
constitute “forward-looking statements” and “forward-looking
information” (together, “forward-looking statements”) within the
meaning of applicable U.S. and Canadian securities laws that
reflect management’s current expectations, assumptions, and
estimates of future events, performance and economic conditions.
Such forward-looking statements rely on the safe harbor provisions
of Section 27A of the U.S. Securities Act of 1933 and Section 21E
of the U.S. Securities Exchange Act of 1934 and the safe harbor
provisions of applicable Canadian securities laws. Because such
statements are subject to risks and uncertainties, actual results
may differ materially from those expressed or implied by such
forward-looking statements. Words and phrases such as “anticipate,”
“believe,” “combined company,” “create,” “drive,” “expect,”
“forecast,” “future,” “growth,” “intend,” “hope,” “opportunity,”
“plan,” “potential,” “proposal,” “synergies,” “unlock,” “upside,”
“will,” “would,” and similar words and phrases are intended to
identify forward-looking statements. These forward-looking
statements may include, but are not limited to, statements
concerning: uncertainties as to whether Bitfarms will enter into
discussions with Riot regarding the proposed combination of Riot
and Bitfarms; the outcome of any such discussions, including the
terms and conditions of any such potential combination; the future
performance, liquidity and financial position of the combined
company, and its ability to achieve expected synergies;
uncertainties as to timing of the Special Meeting or the outcome.
Such forward-looking statements are not guarantees of future
performance or actual results, and readers should not place undue
reliance on any forward-looking statement as actual results may
differ materially and adversely from forward-looking statements.
Detailed information regarding the factors identified by the
management of Riot, which they believe may cause actual results to
differ materially from those expressed or implied by such
forward-looking statements in this press release, may be found in
Riot’s filings with the U.S. Securities and Exchange Commission
(the “SEC”), including the risks, uncertainties and other factors
discussed under the sections entitled “Risk Factors” and
“Cautionary Note Regarding Forward-Looking Statements” of Riot’s
Annual Report on Form 10-K for the fiscal year ended December 31,
2023, filed with the SEC on February 23, 2024, and the other
filings Riot has made or will make with the SEC after such date,
copies of which may be obtained from the SEC’s website at
www.sec.gov. All forward-looking statements contained herein are
made only as of the date hereof, and Riot disclaims any intention
or obligation to update or revise any such forward-looking
statements to reflect events or circumstances that subsequently
occur, or of which Riot hereafter becomes aware, except as required
by applicable law.
Information in Support of Public Broadcast Exemption under
Canadian Law
The information contained in this press release does not and is
not meant to constitute a solicitation of a proxy within the
meaning of applicable corporate and securities laws. Shareholders
of the Company are not being asked at this time to execute a proxy
in favour of Riot’s director nominees or in respect of any other
matter to be acted upon at the Special Meeting. In connection with
the Special Meeting, Riot intends to file a dissident information
circular in due course in compliance with applicable corporate and
securities laws. Notwithstanding the foregoing, Riot has
voluntarily provided in, or incorporated by reference into, this
press release the disclosure required under section 9.2(4) of
National Instrument 51-102 – Continuous Disclosure Obligations (“NI
51-102”) and has filed a document (the “Document”) containing
disclosure prescribed by applicable corporate law and disclosure
required under section 9.2(6) of NI 51-102 in respect of Riot’s
director nominees, in accordance with corporate and securities laws
applicable to public broadcast solicitations. The Document is
hereby incorporated by reference into this press release and is
available under the Company’s profile on SEDAR+ at
www.sedarplus.ca. The registered office of the Company is 110 Yonge
Street, Suite 1601, Toronto, ON M5C 1T4 Canada.
Neither Riot nor any director or officer of Riot is requesting
that Company shareholders submit a proxy at this time. Once formal
solicitation of proxies in connection with the Special Meeting has
commenced, proxies may be revoked by a registered holder of Company
shares: (a) by completing and signing a valid proxy bearing a later
date and returning it in accordance with the instructions contained
in the accompanying form of proxy; (b) by depositing an instrument
in writing that is signed by the shareholder or an attorney who is
authorized by a document that is signed in writing or by electronic
signature; (c) by transmitting by telephonic or electronic means a
revocation that is signed by electronic signature in accordance
with applicable law, as the case may be: (i) at the registered
office of the Company at any time up to and including the last
business day preceding the day the Special Meeting or any
adjournment or postponement of the Special Meeting is to be held,
or (ii) with the chair of the Special Meeting on the day of the
Special Meeting or any adjournment or postponement of the Special
Meeting; or (d) in any other manner permitted by law. In addition,
proxies may be revoked by a non-registered holder of Company shares
at any time by written notice to the intermediary in accordance
with the instructions given to the non-registered holder by its
intermediary.
This press release and any solicitation made by Riot in advance
of the Special Meeting is, or will be, as applicable, made by Riot,
and not by or on behalf of the management of the Company. Proxies
may be solicited by proxy circular, mail, telephone, email or other
electronic means, as well as by newspaper or other media
advertising and in person by managers, directors, officers and
employees of Riot who will not be specifically remunerated
therefor. In addition, Riot may solicit proxies by way of public
broadcast, including press release, speech or publication and any
other manner permitted under applicable Canadian laws, and may
engage the services of one or more agents and authorize other
persons to assist it in soliciting proxies on their behalf.
Riot has entered into agreements with Okapi Partners LLC
(“Okapi”) and Shorecrest Group Ltd. (“Shorecrest”) in connection
with solicitation and advisory services in respect of the
requisitioned meeting, for which Okapi will receive a fee not to
exceed US$1,200,000 and Shorecrest will receive a fee not to exceed
US$110,000, in each case together with reimbursement for reasonable
and out-of-pocket expenses, and under which each of Okapi and
Shorecrest will be indemnified against certain liabilities and
expenses, including certain liabilities under securities laws.
The costs incurred in the preparation and mailing of any
circular or proxy solicitation by Riot will be borne directly and
indirectly by Riot. In the event any of the Nominees are elected or
appointed to the Bitfarms Board, Riot intends to seek reimbursement
from Bitfarms of all expenses it incurs in connection with the
solicitation of proxies for the election of the Nominees at the
Special Meeting.
None of Riot, any director or officer of Riot nor any associate
or affiliate of the foregoing (i) has any material interest, direct
or indirect, by way of beneficial ownership of securities of the
Company or otherwise, in any matter to be acted upon at the Special
Meeting, other than the election of directors, or (ii) has or has
had any material interest, direct or indirect, in any transaction
since the beginning of the Company’s last completed financial year
or, other than the proposal submitted by Riot to Bitfarms on April
22, 2024 and referred to in Riot’s press release dated May 28, 2024
(which proposal has since been withdrawn by Riot), in any proposed
transaction that has materially affected or will materially affect
the Company or any of the Company’s affiliates.
No Offer to Purchase or Sell Securities
This press release is for informational purposes only and is not
intended to and does not constitute an offer to sell or the
solicitation of an offer, or an intention to offer, to subscribe
for or buy or an invitation to purchase or subscribe for any
securities, nor shall there be any sale, issuance or transfer of
securities in any jurisdiction in contravention of applicable law.
Such an offer to purchase securities would only be made pursuant to
a registration statement, prospectus, tender offer, takeover bid
circular, management information circular or other regulatory
filing filed by Riot with the SEC and available at www.sec.gov or
filed with applicable Canadian securities regulatory authorities on
SEDAR+ and available at www.sedarplus.ca.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240624769439/en/
Investor Contacts: Phil McPherson 303-794-2000 ext. 110
IR@Riot.Inc
Okapi Partners Bruce Goldfarb / Chuck Garske, (877) 285-5990
info@okapipartners.com
Shorecrest Group 1-888-637-5789 (North American Toll-Free)
contact@shorecrestgroup.com
Media Contact: Longacre Square Partners Joe Germani / Dan
Zacchei jgermani@longacresquare.com /
dzacchei@longacresquare.com
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