In a significant move within the cryptocurrency industry, Bitfarms, a prominent Bitcoin mining company, has announced its acquisition of Stronghold Digital Mining in a deal valued at approximately $125 million. This acquisition includes the assumption of around $50 million in debt.
The acquisition is expected to significantly enhance Bitfarms' power capacity, potentially adding up to 307 megawatts. This move is seen as a strategic step toward increasing Bitfarms' energy portfolio to over 950 megawatts by the end of 2025.
“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,” said Ben Gagnon, CEO of Bitfarms, in a statement.
Following the news, shares of Stronghold surged by approximately 55 percent in pre-market trading on Nasdaq, reaching $4.55.
Bitcoin mining companies have faced increased pressure due to reduced mining rewards following the Bitcoin halving, coupled with debt burdens and concerns over previous management practices.
As part of the deal, Stronghold shareholders will receive 2.52 shares of Bitfarms for each Stronghold share they hold. This represents a per-share consideration of $6.02, a 71% premium to Stronghold's 90-day volume-weighted average price on Nasdaq as of August 16.
Gagnon further elaborated on the acquisition, 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."
Stronghold shareholders are anticipated to hold just under 10% of the combined company based on the current shares of both companies.
Bitfarms aims to increase long-term shareholder value by diversifying beyond Bitcoin mining. The company plans to vertically integrate power generation, expand energy trading capabilities, and secure two high-potential sites for high-performance computing and artificial intelligence, with significant potential for multi-year expansion.
Stronghold Digital Mining has been exploring options to sell the company for some time. In April, the company filed a registration statement to sell up to $250 million in securities to reduce its debt through share dilution.
Stronghold’s first-quarter 2024 results showed revenues of $27.5 million, reflecting a 27% increase from the previous quarter and a 59% year-over-year growth. The revenue breakdown included $26.7 million from cryptocurrency operations, $700,000 from energy sales, and $100,000 from other activities.
