HIVE Blockchain Technologies Ltd., a cryptocurrency mining operator notified its shareholders that on April 19th, 2019 Genesis Mining, the largest shareholder of HIVE, holding approximately 26.3% of the company’s outstanding shares, requisitioned a meeting of shareholders for the purpose of removing directors independent of Genesis and electing a board of directors, the majority of whom would be senior officers and employees of Genesis.
On April 20th, 2019, the HIVE Board met and appointed an independent Special Committee of the Board to deal with the requisition and related contractual disputes between Genesis and HIVE which gave rise to the requisition. The Special Committee will act in the interests of all HIVE shareholders and the Special Committee will set a date for the requisitioned meeting to be held within four months of proper delivery of the requisition notice.
The meeting requisition is in reaction to a formal notice which HIVE provided on April 2nd, 2019, to Genesis regarding material breaches of the Master Service Agreement (MSA) between the parties. Initially following that notice, the Genesis representatives on HIVE’s Board convened a Board Meeting to remove Frank Holmes as interim Chairman and Chief Executive Officer but were unsuccessful. Discussions have been ongoing between HIVE and Genesis regarding the MSA for several months and the formal notice was issued after it became apparent to HIVE that the matters could not be solved through good-faith negotiation.
HIVE estimates that the various breaches are valued at approximately USD $50 million to HIVE.
Under the MSA, unless such material breaches are cured, HIVE will have the right to terminate the MSA and applicable services orders for cause, which will lead to the right for HIVE to require Genesis to repurchase the mining equipment.
[perfectpullquote align=”full” bordertop=”false” cite=” Frank Holmes, HIVE Blockchain Technologies, Interim Executive Chairman and Interim CEO” link=”” color=”” class=”” size=””]“Discussions with Genesis for full disclosure of all costs for all mining operations have been ongoing since September 2018. We are frustrated that Genesis unilaterally gave notice of increased costs in Sweden and services under the MSA have not been ‘performed in a professional and workmanlike manner in accordance with the highest industry standards’ as required by the MSA. It is disappointing that Genesis has reacted by attempting to eliminate the dispute by taking control of the HIVE board but I am confident that HIVE shareholders will understand that the meeting requisition is a blatant attempt to take control of HIVE for Genesis’ sole benefit to the detriment of all other shareholders”.[/perfectpullquote]
By way of background, HIVE has asked Genesis on multiple occasions to provide a review of electricity pricing in Iceland and Sweden. HIVE is entitled to be charged Genesis’ cost for power pursuant to the MSA but despite numerous requests, Genesis has failed to provide full information as to whether HIVE is being charged Genesis’ cost for power in Iceland and Sweden. This despite unilateral increases to power charges to HIVE issued by Genesis.
In the face of Genesis’ actions to the contrary, HIVE said that it will continue to protect and promote the interests of HIVE shareholders. HIVE is actively seeking alternative service providers to Genesis to provide transparency and superior value to HIVE and its shareholders, and in particular with respect to HIVE’s equipment and operations in Sweden which have recently become dormant through the course of the dispute with Genesis.
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