Bitfarms adopts new 'poison pill' shareholder rights plan after Riot's initial tribunal win

Quick Take

  • Bitfarms has adopted a new “poison pill” strategy following a ruling in favor of Riot Platforms regarding its first shareholder rights plan.
  • Riot has been attempting to take over its Bitcoin mining rival since making a $950 million bid for the firm in April.

Bitcoin miner Bitfarms has adopted a new “poison pill” strategy following a tribunal ruling in favor of rival Riot Platforms regarding its first shareholder rights plan, designed to help prevent Riot’s takeover of the company.

Riot announced on Wednesday that it was successful in its application to the Ontario Capital Markets Tribunal to cease the original “poison pill” plan implemented by Bitfarms’ board of directors, effective immediately, following hearings on July 22 and July 23.

“This ruling from the Tribunal in favor of Riot’s application is a win for all Bitfarms shareholders,” Riot CEO Jason Les said. “The adoption of the off-market Poison Pill is yet another example of the broken corporate governance that plagues Bitfarms and of the ongoing attempts by the Bitfarms directors to entrench themselves. We appreciate that the Tribunal acted quickly and decisively to remove the Poison Pill.”

In June, Bitfarms adopted its first "poison pill" approach, stating that if an entity accumulated more than 15% of Bitfarms' stake, the company would issue fresh shares, diluting the entity's stake.

However, responding on Wednesday, Bitfarms announced that the board of directors unanimously approved the adoption of a new shareholder rights plan, this time involving the accumulation of 20% or more of the company’s common shares, effective for six months.

“The Tribunal has decided to cease trade Bitfarms’ Rights Plan, which effectively terminates the Rights Plan. The Rights Plan was put in place to preserve the integrity of the independent Special Committee’s strategic alternatives review process in light of attempts by Riot to opportunistically acquire the Company,” Bitfarms Lead Board Director Brian Howlett said. “In light of this decision, the Bitfarms Board has adopted the New Rights Plan to ensure the interests of all shareholders are protected.”

However, adoption of the new plan is subject to the acceptance of the Toronto Stock Exchange and Riot could apply to the tribunal again to nullify the plan.

Riot’s takeover attempt

Riot Platforms attempted to acquire Bitfarms in April for roughly $950 million. Last month, Riot said it was ready to engage with a reconstituted Bitfarms board about a potential acquisition but was withdrawing its previous offer to acquire the company for $2.30 per share "given the current board’s lack of meaningful engagement."

Since that deal was thwarted, Riot has steadily been buying up stock in the firm to become its largest shareholder. As things stand, Riot owns about 60 million shares, or 14.9%, of Bitfarms.

Earlier this month, Bitfarms set Oct. 29 as the date for a special meeting of its shareholders to vote on reconstituting its board of directors following Riot Platforms’ requisition for the meeting on June 24.

Bitfarms shareholders are set to vote on removing Nicolas Bonta, the chairman and interim CEO, and director Andrés Finkielsztain at the special meeting. Bitfarms appointed Ben Gagnon as its new CEO on July 8, though he does not currently serve on the board, so he is not a target for removal. They will also vote on the removal of Fanny Philip, who recently filled the vacancy left by co-founder Emiliano Grodzki after he was removed from the board at the shareholders' annual meeting.

The three candidates Riot is putting up for the board are John Delaney, an expert in government and public affairs with both public and private sector experience; Amy Freedman, a corporate governance and capital markets expert with over 25 years of experience; and Ralph Goehring, a financial and energy expert with extensive public company CFO experience.

Riot Platforms has a market cap of $3.4 billion compared to Bitfarms' cap of about $1.1 billion.


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About Author

James Hunt is a reporter at The Block and writer of The Daily newsletter, keeping you up to speed on the latest crypto news every weekday. Prior to joining The Block in 2022, James spent four years as a freelance writer in the industry, contributing to both publications and crypto project content. James’ coverage spans everything from Bitcoin and Ethereum to Layer 2 scaling solutions, avant-garde DeFi protocols, evolving DAO governance structures, trending NFTs and memecoins, regulatory landscapes, crypto company deals and the latest market updates. You can get in touch with James on Telegram or 𝕏 via @humanjets or email him at [email protected].

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