HC Wainwright Analysts See Growth Potential in Bitfarms Following Settlement with Riot Platforms

HC Wainwright Analysts See Growth Potential in Bitfarms Following Settlement with Riot Platforms

Bitfarms’ stock is expected to experience significant growth following the resolution of a six-month-long hostile takeover attempt by Riot Platforms, according to analysts at HC Wainwright.

On September 23, Bitfarms and Riot Platforms reached an agreement to end Riot’s bid to acquire the Canadian Bitcoin mining firm. H.C. Wainwright analysts have reaffirmed their “Buy” rating on Bitfarms, citing the stock as undervalued. They have set a price target of $4 per share, as stated in a note shared with crypto.news.

As of this writing, Bitfarms’ stock (NASDAQ: BITF) is trading at $2.06 per share. Based on revenue estimates for 2024, the stock is currently trading at an approximate 40% discount compared to other Bitcoin mining companies, according to the analysts.

Settlement Details

The agreement marks the conclusion of Riot’s acquisition efforts, which began in April when the company made a $950 million offer to purchase Bitfarms. The bid was ultimately rejected by Bitfarms’ board, which deemed it undervalued.

Following the rejection, Riot proceeded to acquire 19.9% of Bitfarms‘ outstanding shares and initiated efforts to restructure the board through a special shareholder meeting. This strategy has now been abandoned as part of the settlement.

Under the terms of the agreement, Bitfarms will expand its board to six members and appoint an independent director, with Riot agreeing to support the proposed changes. In addition, Riot retains the option to acquire more shares in Bitfarms, as long as its holdings remain above 15%.

Analysts’ Perspective

H.C. Wainwright analysts view this agreement as a substantial win for Bitfarms, as it removes a significant cloud over the company’s stock performance. With the distraction of the takeover now behind them, Bitfarms is better positioned to focus on its growth strategy for 2024, which includes an ambitious goal of reaching 21 exahashes per second by year-end. This is seen as a critical step in regaining investor confidence and executing on its long-term plans.

The analysts also note that the settlement is beneficial for Riot, as it avoids the cost and complexity of a potential proxy battle with Bitfarms.

Their $4 price target is based on a 6.5x enterprise value-to-revenue multiple for 2024, in line with the valuation of Bitfarms’ industry peers. However, they caution that risks remain, particularly related to the volatility of Bitcoin prices, potential construction delays, and possible shareholder dilution.

Following the announcement of the settlement, Bitfarms‘ shares saw a modest increase of 1.7%, while Riot’s stock also rose 1.3%, signaling a positive response from the market.