Bitfarms Acquires Stronghold Digital Mining in $125 Million Deal

Bitfarms, a Bitcoin mining company, has announced the acquisition of Stronghold Digital Mining for an estimated equity value of $125 million. This acquisition will allow Stronghold shareholders to receive 2.52 shares of Bitfarms for each share they currently hold.

Additionally, the transaction includes the assumption of approximately $50 million in debt and is expected to increase Bitfarms’ power capacity by up to 307 megawatts. By the end of 2025, Bitfarms aims to enhance its energy portfolio to over 950 megawatts.

Ben Gagnon, CEO of Bitfarms, expressed pride in this acquisition, calling it a “transformative step” ensuring the company’s future strength. He stated in a press release:

“After three years of ongoing discussions, I am proud to announce this transformative acquisition, which is a decisive step in securing a strong future for Bitfarms.”

In pre-market trading, the shares of Stronghold jumped by approximately 55% on Nasdaq, reaching $4.55.

Bitcoin mining companies are facing challenges due to diminished mining rewards following the Bitcoin halving, compounded by their debt obligations and previous management issues.

Shareholder Provisions

For Stronghold shareholders, the acquisition guarantees 2.52 shares of Bitfarms for each Stronghold share held, amounting to a consideration of $6.02 per share—a remarkable 71% premium based on the 90-day volume-weighted average price on Nasdaq as of August 16.

Gagnon further elaborated on the benefits of the deal, stating:

“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, up from approximately 6% today.”

Post-acquisition, Stronghold shareholders will hold just under 10% of the resulting combined company, as per the current outstanding shares of both firms.

Driving Shareholder Value

The integration with power generation and the expansion of energy trading capabilities are critical components of Bitfarms’ strategy. They also emphasize the acquisition of two promising sites for high-performance computing and artificial intelligence. According to Gagnon, this approach aims to diversify the company’s operations beyond Bitcoin mining, creating substantial long-term shareholder value.

Stronghold Digital Mining has been contemplating a sale for an extended period. Recently, in April, Stronghold filed to sell up to $250 million in securities, intending to alleviate its debt through share dilution.

In their first quarter results for 2024, Stronghold reported revenues of $27.5 million, marking a 27% increase from the previous quarter and a 59% year-over-year rise. The revenue streams included $26.7 million from cryptocurrency activities, $700,000 from energy sales, and $100,000 from various other services.