Bitfarms Acquires Stronghold Digital in $175 Million Stock and Debt Deal

• Bitfarms will acquire Stronghold Digital in a $175 million deal involving stock and debt financing, expanding its mining and energy portfolio.
• The deal reflects Bitfarms’ strategy to diversify beyond bitcoin mining, integrating with power generation and expanding its energy trading capabilities.
• Stronghold’s stock surged 70%, while Bitfarms saw a 5% dip, highlighting the market’s mixed reactions to the acquisition amidst industry challenges.

Bitfarms (BITF) announced on Wednesday its agreement to acquire Stronghold Digital (SDIG) in a $175 million stock and debt-financed transaction. Both companies’ boards have unanimously approved the deal, which is expected to close in the first quarter of 2025.

The merger will involve a $125 million equity transaction where Bitfarms will issue 2.52 shares of BITF stock for each Stronghold share. Additionally, Bitfarms will assume $50 million of Stronghold’s debt. The deal includes a 71% premium on Stronghold’s 90-day volume-weighted average price as of August 16, 2024.

Stock Market Reactions

On the day of the announcement, Stronghold’s stock surged over 70% in trading, while Bitfarms’ stock saw a 5% decline. This market response reflects the complex nature of the acquisition, which comes at a challenging time for the cryptocurrency mining industry.

The acquisition occurs during a difficult period for bitcoin miners, who are grappling with reduced revenues following the recent Bitcoin halving event. This halving has forced companies to explore strategies to remain competitive, including expanding their operations, upgrading mining fleets, and venturing into related sectors such as high-performance computing (HPC) and artificial intelligence (AI).

Strategic Expansion and Future Plans

Bitfarms’ CEO, Ben Gagnon, emphasized that the acquisition aligns with the company’s strategy to diversify beyond bitcoin mining. The deal will expand Bitfarms’ energy portfolio to 950 megawatts, with nearly half of that capacity based in the United States by the end of 2025. Additionally, Bitfarms plans to integrate with power generation and enhance its energy trading capabilities.

Founded in 2017, Bitfarms operates 12 mining facilities across Canada, the United States, Paraguay, and Argentina. The acquisition of Stronghold will add two merchant power plants in Pennsylvania to Bitfarms’ portfolio, further strengthening its operations in North America.

Industry Context and Competitive Pressures

The acquisition also follows Riot’s interest in Bitfarms. Riot, one of the largest bitcoin miners in the U.S., has been pursuing a takeover of Bitfarms, purchasing nearly 20% of its stock and positioning itself as the company’s largest shareholder. Riot has nominated three independent directors to Bitfarms’ board, signaling its influence and future intentions.