Bitfarms adopts a poison pill plan to resist Riots acquisition. Mining companies may face a wave of integration after th

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Original author: Chloe, PANews

Bitcoin mining company Bitfarms announced on June 10 that it has approved a shareholder rights plan, also known as a poison pill, to prevent acquisitions by peer and competitor Riot Platforms. According to the statement, this equity dilution anti-takeover measure is a defensive measure taken by the company against active acquisitions, aimed at reducing the companys attractiveness or diluting the acquirers 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 by a hostile takeover bid 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.

Bitfarms 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 entitys shares. After September 10, if any acquisition attempt meets certain conditions, the threshold will be relaxed to 20%.

In other words, 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, while leaving room for friendly mergers and acquisitions.

Riot becomes the company’s largest shareholder and also requests to add independent directors to Bitfarms’ board of directors

The key time point that prompted Bitfarms to adopt the poison pill plan was that Riot Platforms acquired 9.25% of Bitfarms shares on May 28, becoming the companys largest shareholder. Then Riot bought 1.5 million shares on June 5, increasing its shareholding ratio 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 Riots acquisition offer. After careful consideration, the special committee concluded that Riots offer seriously underestimated the companys value and rejected the acquisition offer of nearly $1 billion.

Then came Riots 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 Riots 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 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 Less 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 a certain 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, promote the reorganization of the Bitfarms board of directors, and then complete its acquisition plan.

Riot is not the only one, other mining companies are also planning to participate in the acquisition

If Riot and Bitfarms merge, they will become one of the largest Bitcoin mining companies in the world. According to Riot, the merged company will have 1 gigawatt (GW) of power generation capacity and 19.6 exahash per second (EH/s) of self-mining capacity.

The two miners have a total of 15 mines 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 that Riot is not the only company that has the opportunity to acquire Bitfarms. Bitfarms pointed out that it has received acquisition intentions from many companies. Joe Flynn, an analyst at Compass Point Research and Trading, pointed out in a research report last week that large mining companies such as Marathon Digital and CleanSpark will also compete in this wave of potential acquisitions.

This article is sourced from the internet: Bitfarms adopts a poison pill plan to resist Riots acquisition. Mining companies may face a wave of integration after the halving

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