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The “poison pill” strategy, formally known as a shareholder rights plan, was implemented by Bitfarms on June 13 to deter Riot’s aggressive acquisition efforts.
Cryptocurrency mining firm Bitfarms has been ordered to abandon its “poison pill” strategy in its ongoing battle against a takeover attempt by rival company Riot. This decision comes following a ruling by the Ontario Capital Markets Tribunal on July 24, which issued a cease trade order preventing Bitfarms from selling additional shares as part of its defense against the $950 million buyout offer.
Bitfarms Adopts a Defensive Strategy
The “poison pill” strategy, formally known as a shareholder rights plan, was implemented by Bitfarms on June 13 to deter Riot’s aggressive acquisition efforts. This tactic allows a company to issue new shares at a discount to existing shareholders, diluting the stock’s value and making a takeover more expensive and less attractive for the potential acquirer.
Bitfarms resorted to this strategy in an effort to protect itself from being taken over by Riot. However, Riot challenged the move, bringing the matter before the Ontario Capital Markets Tribunal.
During the hearing, Riot argued that the “poison pill” strategy was unfairly obstructing its legitimate takeover bid and was not in the best interest of Bitfarms’ shareholders.
Riot Wins against Bitfarms
After reviewing the case, the Tribunal agreed with Riot’s argument and issued a cease trade order, effectively forcing Bitfarms to halt its defensive share issuance immediately.
“This ruling from the Tribunal in favor of Riot’s application is a win for all Bitfarms shareholders. We appreciate that the Tribunal acted quickly and decisively to remove the Poison Pill,” Riot said in a statement on Wednesday. The company’s CEO Jason Les, described the ruling as a “win for all Bitfarms shareholders.”
The takeover battle started in May when Riot proposed to purchase all the outstanding shares of the financially battered rival for $2.30 per Bitfarms common share worth approximately $950 million. However, Bitfarms’ board of directors rejected the offer, claiming it was a lowball offer.
The rejection did not stop Riot from continuing to pursue the acquisition. The crypto mining firm plans to take the matter directly to Bitfarms’ shareholders.
In June, Riot announced its plan to call a special meeting of Bitfarms shareholders, where it intends to propose the appointment of several independent directors to the board of directors.
A Special Shareholders Meeting
Shortly after, the firm disclosed that it has nominated John Delaney, Amy Freedman, and Ralph Goehring to join the board as independent candidates.
The company clarified that these nominees are entirely independent of both Riot and Bitfarms and are highly qualified to potentially bring an end to the long takeover battle between the two companies.
With Bitfarms ordered to halt its poison pill strategy, the special shareholders meeting has been scheduled for October 29. Riot believes that its three director nominees will join the Bitfarms directors during the meeting.
Currently, Riot owns 14% of Bitfarms’ shares. The company purchased additional shares in June to increase its holdings, bringing the total to around 57.62 million shares.
