3 months ago
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The new Bitfarms Poison Pill hopes to keep Riot at bay for a while, protecting itself from a forced takeover from the rival.
Leading global Bitcoin mining company Bitfarms approved a new shareholder rights plan on Monday to protect itself from a hostile takeover attempt by rival mining company Riot Platforms. Commonly called a “Poison Pill”, the Rights Plan is a defense strategy that shields the company from external factors that threaten its integrity. In a Monday press release, Bitfarms noted:
“The Rights Plan is being adopted to preserve the integrity of our previously announced strategic alternatives review process and is in the best interests of all Bitfarms’ shareholders.”
Riot Platforms Plans Takeover
Bitfarms considered the poison pill necessary because of Riot Platforms’ recent moves. The press release explains that Bitfarms received a proposal from Riot on April 22, when the latter held 14.8 million common Bitfarms shares, representing 3.61%. However, Bitfarms’ Special Committee concluded that the proposal was low, at $950 million, and tried to involve Riot in a Strategic Alternatives Review Process.
Unfortunately, Riot has refused to participate and is buying up more Bitfarms shares “to undermine the integrity of the process and thwart the interest of third parties”. Since the initial attempt, Riot has acquired an additional 8.01% of Bitfarms’ common shares. The press release states that Riot now holds 47.8 million shares, representing 11.62%.
Riot plans to call a special shareholder meeting because of its proposal. The company intends to discuss the potential appointment of a new independent director, suggesting that Bitfarms’ directors are not acting in the best interest of shareholders. In a press release, Riot CEO Jason Les writes that Bitfarms Board founders Nicolas Bonta and Emiliano Grodzki are not acting in the best interest of the company’s shareholders. Les cited the termination of Bifarms’ CEO “without a transition plan”, as well as allegations the ousted CEO made against some members of the Bitfarms Board.
Bitfarms announced on March 25 that former CEO Geoffrey Morphy was leaving the company when they found a replacement. However, following a claim Morphy filed at the Superior Court of Ontario, Morphy was terminated and is no longer a member of the Board.
Specifics of the Bitfarms Poison Pill
Starting June 20, Bitfarms will issue one right per common share to all shareholders. These rights become exercisable if any person or related persons acting jointly, holds at least 15% of all outstanding common shares until September 10, without following the “Permitted Bid” provisions in the Rights Plan. After September 10, the percentage becomes 20%.
“The Special Committee, in consultation with its financial, legal and strategic advisors, believes that the adoption of the Rights Plan is necessary at this time in order to ensure, to the extent possible, that the Board has sufficient opportunity to identify, develop and negotiate alternatives, if considered appropriate…to deliver the best value for Bitfarms’ shareholders,” the company wrote.
Regardless of Bitfarms’ attempt to protect itself from Riot, the poison pill requires approval from the Toronto Stock Exchange and must receive shareholder ratification within six months.
