Author: Chloe, PANews
Bitcoin mining company Bitfarms issued a statement on June 10, announcing that it had approved the adoption of a Shareholder Rights Plan, also known as a "poison pill" plan, to prevent acquisitions by peers and rivals Riot Platforms. According to the statement, this equity dilution anti-takeover measure is a company's defensive measure against unsolicited acquisitions, aiming to reduce the company's attractiveness or dilute the acquirer's ownership of the acquisition target.
Bitfarms stated that the plan has been approved by the board of directors and "aims to prevent the company from being taken over by a cheap hostile takeover during the key strategic evaluation period, in order to safeguard the fundamental interests of the evaluation process itself and the majority of shareholders."
Bitfarm’s “poison pill” plan states that if an entity (acquirer) or its related parties accumulates more than 15% of Bitfarms shares between June 20 and September 10, the company will issue new shares , diluting the entity’s shares. After September 10, if any acquisition attempt meets certain conditions, the threshold will be relaxed to 20%.
In other words, Bitfarms’ rights plan sets a shareholding ratio threshold that changes over time. During the critical strategic review period, the threshold is higher to strengthen defenses; after the review is completed, the threshold is relaxed to 20%, as long as the acquirer meets compliance requirements, indicating that the board is more willing to consider bona fide acquisition proposals. This arrangement mainly protects the interests of the company and shareholders, and also leaves room for friendly mergers and acquisitions.
Riot became the company’s largest shareholder and also requested the addition of independent directors to Bitfarms’ board of directors
The key point in time that prompted Bitfarms to adopt the "poison pill" plan was that Riot Platforms acquired 9.25% of Bitfarms' shares on May 28, becoming the company's largest shareholder. Riot then purchased an additional 1.5 million shares on June 5, raising its stake to approximately 12%.
Riot also said it plans to request a special shareholder meeting to add independent directors to Bitfarms' board, citing concerns over its corporate governance.
There is speculation that Riot is trying to promote its acquisition plans and weaken the anti-takeover stance of Bitfarms’ board of directors. It shows clear disagreements and struggles between the Bitfarms board of directors and Riot over whether the acquisition should be accepted and how to protect shareholder interests.
Pulling back the time to April 22, when Riot held 3.61% of Bitfarms shares, it made an acquisition offer to the Bitfarms board of directors, hoping to acquire all outstanding shares of the company. Riot believes that Bitfarms’ board of directors is not looking out for the best interests of shareholders. In response, Bitfarms’ board of directors established a special committee to evaluate Riot’s acquisition offer. After careful consideration, the Special Committee concluded that Riot's bid materially undervalued the company and rejected the nearly $1 billion acquisition proposal.
What followed was a series of deliberate acquisitions by Riot and contingency measures for Bitfarms’ “poison pill” strategy.
Was CEO firing the trigger for takeover?
However, a major factor behind Riot’s plan to convene a shareholder meeting and add independent directors to the Bitfarms board of directors is Bitfarms’ announcement on May 13 to fire CEO Geoffrey Morphy.
According to a response from Riot CEO Jason Les, Bitfarms’ decision to fire its CEO played a role in Riot’s proposed acquisition. Jason Les said he believes founders Nicolas Bonta and Emiliano Grodzki on the Bitfarms board may not be looking out for the best interests of all Bitfarms shareholders.
At a time when Bitfarms and the industry as a whole are in the midst of a critical executive period, Bitfarms' board of directors abruptly fired the CEO without a transition plan. Les raised questions about Bitfarms’ corporate governance.
Additionally, fired former CEO Geoffrey Morphy has filed a $27 million lawsuit against Bitfarms, accusing the company of breach of contract, wrongful termination, and more. If the allegations are true, they would further highlight issues within a certain segment of Bitfarms’ board of directors.
For the above reasons, Les believed it was necessary to convene a special shareholder meeting to give shareholders the opportunity to carry out the necessary reorganization of the Bitfarms board of directors, fixing Bitfarms corporate governance issues and creating maximum value for all shareholders as the top priority.
Bitfarms' decision to fire its CEO therefore partly prompted Riot to make a takeover bid and question the capabilities and motivations of the existing board. However, it is obvious that Riot also hopes to use this incident to gain more shareholder support, promote the reorganization of Bitfarms’ board of directors, and then complete its acquisition plan.
Riot is not the only one, there are other miners planning to participate in the acquisition
A merger between Riot and Bitfarms would create one of the largest Bitcoin mining companies in the world. According to Riot, the combined company will have 1 gigawatt (GW) of generating capacity and 19.6 exahash per second (EH/s) of self-mining capacity.
The two miners have a combined 15 mine sites in the United States, Canada, Paraguay and Argentina that will have a combined generating capacity of up to 2.2 gigawatts when fully developed. Nishant Sharma, founder of BlocksBridge Consulting, pointed out that the two companies mined a total of 676 BTC in April, second only to Marathon Digital, Core Scientific and CleanSpark.
“Mining is indeed undergoing consolidation due to increased competition and an increasingly tough environment following the Bitcoin halving,” Sharma told Blockworks.
And it seems Riot isn't the only company with a chance to acquire Bitfarms. Bitfarms noted that it has received acquisition interest from a number of companies. Joe Flynn, an analyst at Compass Point Research and Trading, noted in a research note last week that large miners such as Marathon Digital and CleanSpark are also competing in this wave of potential acquisitions.
(The above content is excerpted and reprinted with the authorization of our partner PANews, original text link)
Statement: The article only represents the author's personal views and opinions, and does not represent the objective views and positions of the blockchain. All contents and opinions are for reference only and do not constitute investment advice. Investors should make their own decisions and transactions, and the author and Blockchain Client will not be held responsible for any direct or indirect losses caused by investors' transactions.
"Bitfarms takes a "poison pill" to resist Riot's acquisition threat, and miners may face a wave of consolidation after the halving." This article was first published on "Blocker".
