Bitfarms has adopted a "poison pill" strategy to thwart Riot Platforms' hostile takeover bid, aiming to make the acquisition prohibitively expensive.
Bitcoin miner Bitfarms has announced the adoption of a "poison pill" shareholder rights plan. The defensive measure comes in the wake of a hostile takeover bid by its larger competitor, Riot Platforms.
According to a statement released on Monday by Bitfarms, the plan will be triggered if any entity acquires an equity stake greater than 15% by September 10. The mechanism will lead to the issuance of new stock to existing shareholders before that date, diluting the position of the potential acquirer. This move is aimed at preventing a hostile takeover by making it prohibitively expensive for Riot Platforms, which currently holds a 12% stake in Bitfarms.
The "poison pill" strategy was adopted after Riot Platforms' $950 million offer in May, following Bitfarms' rejection of an initial approach in April. The offer, which Bitfarms' board deemed as significantly undervaluing the company, consisted of $2.30 per share in cash and stock – a premium of about 20% above Bitfarms' share value at the time.
As of June 5, Riot beneficially owned 47,830,440 shares, representing approximately 12% of Bitfarms' issued and outstanding common stock. Riot has yet to comment on the adoption of the "poison pill" by Bitfarms.
The market reacted to these developments with Bitfarms’ shares dropping by 4.2% to $2.30, while Riot’s shares saw an increase of 1.8% to $9.90. Year-to-date, the stock performance for both companies has been unfavorable, with declines of around 21% and 36%, respectively.
In a separate press release, Bitfarms elaborated on the adoption of the shareholder rights plan, stating it was unanimously approved by the Board of Directors to preserve the integrity of its strategic alternatives review process, which is exploring various avenues including potential business combinations or sales.
The "poison pill" plan, effective from June 10, 2024, will not affect Riot's ability to make a takeover bid in compliance with Canadian securities laws. It will become exercisable upon a person or group acquiring 15% or more of Bitfarms' common shares, or 20% thereafter, without adhering to the "Permitted Bid" provisions outlined in the plan. Permitted Bids must meet certain criteria, including a minimum duration of 105 days and acceptance by over 50% of independent shareholders.
Bitfarms stated that the strategic review process is ongoing and the adoption of the shareholder rights plan is in the best interests of its shareholders. The plan is subject to ratification by shareholders within six months and is awaiting acceptance by the Toronto Stock Exchange (TSX).
While the TSX typically defers acceptance of rights plans in response to specific take-over bids, the Board of Bitfarms is not aware of any other take-over attempts aside from Riot's proposal. The full text of the rights plan will be available on the SEDAR+ and SEC websites.
The situation remains dynamic as Bitfarms continues to explore strategic alternatives, while Riot's intentions following the adoption of the "poison pill" plan remain to be seen.
