Bitfarms Adopts New Poison Pill Defence Against Riot

Bitcoin miner Bitfarms has approved a new shareholder rights protection strategy to prevent a hostile takeover by competitor Riot Platforms.

On June 24, the Ontario Capital Markets Tribunal ruled in favour of Riot, ordering Bitfarms to immediately cease its previous plan. The initiative adopted in June, known as a “poison pill“, proposed that if an external organisation accumulated 15% of shares, the company would issue new shares, diluting the buyer’s stake.

“This Tribunal decision on Riot’s application is a victory for all Bitfarms shareholders. The adoption of a non-market Poison Pill is yet another example of the broken corporate governance from which the firm suffers, and the ongoing attempts by directors to cling to power,” commented Riot CEO Jason Les on the ruling.

On May 29, news emerged of Riot’s offer to acquire Bitfarms for $950 million. It included a 20% premium over the average stock price for the month. However, the Canadian company’s board deemed the offer “significantly undervaluing the company and its growth prospects.”

Riot continued to increase its stake in the firm, reaching 14.9% by the end of June. The company demanded a special meeting of Bitfarms shareholders and nominated three independent directors to the board as part of its hostile takeover campaign.

Bitfarms responded to the Tribunal’s decision with a new defence plan. It limits the accumulation of shares to a 20% stake. The firm’s management noted that there are currently no specific takeover proposals that could be accepted under Canadian law. This means that holders of 50% of common shares must consent to their purchase.

“However, the board is aware that Riot seeks to replace three Bitfarms directors at a special hybrid shareholder meeting on October 29, 2024. The defence plan allows Riot to continue nominating candidates,” the statement reads.

The strategy took effect immediately but must receive shareholder approval within six months. If not, the plan will be halted.

In July, Riot acquired the Kentucky-based mining company Block Mining for $92.5 million.