Bitfarms announced on Monday that its Board of Directors has unanimously approved a shareholder rights plan, effective immediately, to preserve the integrity of its strategic alternatives review process in response to an unsolicited takeover offer from Riot Platforms Inc.
The plan, commonly known as a “poison pill,” is intended to prevent any party from gaining control of Bitfarms without providing fair value to all shareholders.
‘Poison pill’ Strategy
A poison pill strategy is a defensive measure used to prevent corporate takeovers by making a deal too expensive for the acquiring company. Bitfarms stated that it would issue new stock to existing shareholders, diluting the stake of any entity pursuing a hostile takeover.
Under the Rights Plan, one right will be issued for each common share outstanding as of June 20. These rights will become exercisable if any person or entity acquires 15% or more of Bitfarms’ outstanding common shares without complying with the plan’s “Permitted Bid” provisions.
Permitted Bids must be made to all shareholders, remain open for 105 days, and meet other specific conditions. While the Rights Plan is effective immediately, it requires shareholder ratification within six months.
Bitfarms also disclosed that the Toronto Stock Exchange (TSX) will defer its consideration of the Rights Plan until it is assured that the appropriate securities commission will not intervene. This deferral does not affect the plan’s adoption or operation, which will remain effective for a minimum of six months from June 10, the date of adoption, unless terminated earlier.
Riot’s Takeover Plans
Riot Platforms made its unsolicited proposal public in May, offering to buy Bitfarms for about $950 million. The company also expressed its intention to request a special shareholder meeting to add independent directors to Bitfarms’ board.
This came after Bitfarms rejected Riot’s takeover approach in April. Riot initially offered $2.30 per share in cash and stock for Bitfarms, approximately 20% above the firm’s share price before the offer was made.
Following an evaluation of the proposal, Bitfarms’ Special Committee of independent directors concluded that Riot’s offer significantly undervalued the company and its growth prospects.
On May 28, Riot acquired a 9.25% stake in Bitfarms, becoming the company’s largest shareholder. Riot further increased its stake by purchasing an additional 1.5 million shares on June 5, raising its total ownership to approximately 12%. By June 5, Riot beneficially owned 47,830,440 shares of Bitfarms.
