Original author: Chloe, PANews
Bitcoin mining company Bitfarms announced in a statement on June 10 that it has approved a shareholder rights plan, also known as a "poison pill," to prevent a takeover by its peer and competitor Riot Platforms. According to the statement, this equity dilution anti-takeover measure is a company's defensive measure against active takeovers, designed to reduce the company's attractiveness or dilute the acquirer's ownership of the acquisition target.
Bitfarms said the plan, which has been approved by the board of directors, is “designed to prevent the company from being acquired at a low price during a critical strategic review period in order to safeguard the fundamental interests of the review process itself and the majority of shareholders.”
Bitfarm's poison pill plan states that if an entity (acquirer) or its affiliates accumulate more than 15% of Bitfarms shares between June 20 and September 10, the company will issue new shares to dilute the entity's shares. After September 10, if any acquisition attempt meets certain conditions, the threshold will be relaxed to 20%.
That is, Bitfarms' rights plan sets a threshold for shareholding ratios that changes over time. During the critical strategic evaluation period, the threshold is higher to strengthen defense; after the evaluation is completed, as long as the acquirer meets compliance requirements, the threshold will be relaxed to 20%, indicating that the board of directors is more willing to consider good-faith acquisition proposals. This arrangement is mainly to protect the interests of the company and shareholders, and leave room for friendly mergers and acquisitions.
Riot becomes the company’s largest shareholder and also requests to add independent directors to Bitfarms’ board
The key point that prompted Bitfarms to adopt the "poison pill" plan was that Riot Platforms acquired a 9.25% stake in Bitfarms on May 28, becoming the company's largest shareholder. Then Riot bought another 1.5 million shares on June 5, increasing its stake to about 12%.
Riot also said it plans to request a special shareholder meeting to add independent directors to Bitfarms’ board, citing concerns about its corporate governance.
The outside world speculated that Riot was trying to promote its acquisition plan and weaken the anti-acquisition stance of the Bitfarms board of directors. This shows that there are obvious differences and struggles between the Bitfarms board of directors and Riot on whether to accept the acquisition and how to protect the interests of shareholders.
Back on April 22, Riot held 3.61% of Bitfarms' shares and made an offer to the Bitfarms board of directors, hoping to acquire all outstanding shares of the company. Riot believes that the Bitfarms board of directors is not seeking the best interests of shareholders. In response, the Bitfarms board of directors set up a special committee to evaluate Riot's acquisition offer. After careful consideration, the special committee concluded that Riot's offer seriously underestimated the company's value and rejected the acquisition proposal of nearly $1 billion.
Then came Riot's series of deliberate acquisitions and Bitfarms' contingency measures for the poison pill strategy.
Was the firing of the CEO the trigger for the acquisition?
However, a major factor behind Riot's plan to hold a shareholders' meeting and add independent directors to the Bitfarms board of directors is that Bitfarms announced on May 13 that it had fired CEO Geoffrey Morphy.
Bitfarms’ decision to fire its CEO played a role in Riot’s acquisition proposal, according to a response from Riot CEO Jason Les, who said he believes that the presence of founders Nicolas Bonta and Emiliano Grodzki on the Bitfarms board may not be acting in the best interests of all Bitfarms shareholders.
At a time when Bitfarms and the entire industry are in a critical execution period, the Bitfarms board of directors suddenly fired the CEO without formulating a transition plan, which raised Les's questions about Bitfarms' corporate governance.
In addition, the fired former CEO Geoffrey Morphy has filed a $27 million lawsuit against Bitfarms, accusing the company of breach of contract, wrongful dismissal, etc. If these allegations are true, they will further highlight the problems within the Bitfarms board of directors.
For the above reasons, Les believes it is necessary to hold a special meeting of shareholders to give shareholders the opportunity to make necessary changes to the Bitfarms board of directors, fix Bitfarms' corporate governance issues and create maximum value for all shareholders as a top priority.
Therefore, Bitfarms’ decision to fire its CEO has, to some extent, prompted Riot to make an acquisition offer and question the capabilities and motivations of the existing board of directors. However, it is clear that Riot also hopes to use this incident to gain more shareholder support and promote the reorganization of the Bitfarms board of directors to complete its acquisition plan.
Riot is not the only one, other mining companies are also 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, one billion watts) of power generation capacity and 19.6 exahash per second (EH/s) of self-mining capacity.
The two miners have a total of 15 mining farms in the United States, Canada, Paraguay and Argentina, with a total power generation capacity of up to 2.2 GW 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. "The mining industry is indeed undergoing consolidation due to increased competition and increasingly harsh environment after the Bitcoin halving," Sharma told Blockworks.
And it seems Riot isn’t the only company that could potentially 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 mining companies such as Marathon Digital and CleanSpark are also competing for potential acquisitions.
