Bitfarms announces ‘poison pill’ that blocks potential hostile takeover of riot platforms
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Bitfarms announces ‘poison pill’ that blocks potential hostile takeover of riot platforms

KEY POINTS

  • Bitfarms said it believes the proposed acquisition amount undervalues ​​the company
  • Riot has expressed concern about recent legal issues between Bitfarms and its former CEO
  • Riot was recently broken up by Kerrisdale Capital, which stated that the miner was heading towards ‘collapse’

Bitcoin mining company Bitfarms has announced that it will adopt a shareholder rights plan, also known as a “poison pill,” to prevent a potential hostile takeover as proposed by Bitcoin mining titan Riot Platforms.

Bitfarms said it has carefully reviewed Riot’s proposal to acquire all of the issuance and outstanding shares of Bitfarms common stock and has determined that “the proposal materially undervalues ​​the Company and its growth prospects,” according to a press release on Monday.

The miner revealed that it had invited Riot to participate in a process to review strategic alternatives, but the cryptocurrency mining giant “refused to participate in this process and instead continued to acquire shares of the Company’s common stock on the open market.”

Bitfarms’ rights plan states that if an entity accumulates more than 15% of the shares in the mining company after June 20 to September 10, Bitfarms will issue new shares. The new issue of shares will result in dilution of the shares of the accumulating entity. Such plans are used by company management boards to block hostile takeover attempts.

The announcement came less than a week after Riot said it had acquired a 12% stake in Bitfarms. Riot, which is currently one of the world’s largest Bitcoin miners, revealed late last month that it had initially proposed taking Bitfarms private for $950 million in April, but the miner “rejected the proposal without engaging in substantive dialogue with Riot.”

It also said a recent legal dispute between the miner and its recently fired CEO raises concerns about whether some board members had a duty to act in the best interests of all parties involved.

“Therefore, we intend to convene a Special Meeting to give shareholders the opportunity to make the necessary changes to the Bitfarms Board of Directors and repair Bitfarms’ broken corporate governance and maximize value for all Bitfarms shareholders and their top priorities,” Jason Les, Riot CEO, said at the time.

Bitfarms’ former CEO Geoffrey Morphy sued the company last month, citing breach of contract, and sought $27 million in damages. During this time, Morphy continued as president and CEO of the company while Bitfarms searched for a successor following his firing in March.

After Morphy filed its lawsuit in mid-May, Bitfarms said Morphy had been “terminated effective immediately,” saying Morphy’s claims were “without merit.”

Meanwhile, Riot Platforms is not without its own problems after short-seller Kerrisdale Capital claimed in a scathing report that the cryptocurrency mining giant was “heading for a mine collapse.”

Kerrisdale said Riot is missing out due to the changing regulatory environment in Texas, where Riot conducts a huge portion of its mining operations. He also criticized Riot shareholders for accepting “excessive executive compensation and serial dilution.”