Bitfarms, a leading Bitcoin mining company, has introduced a new ‘poison pill’ strategy in response to the Ontario Capital Markets Tribunal’s decision to terminate its previous plan aimed at preventing a hostile takeover by Riot Platforms. The tribunal’s ruling comes amid an escalating battle between the two firms, with Riot aggressively seeking control over Bitfarms.
Tribunal Decision and New Poison Pill Against “Creeping” Bids
The Ontario Capital Markets Tribunal recently issued a cease-trade order against Bitfarms’ initial poison pill strategy, which was designed to prevent Riot Platforms from acquiring more than 15% of Bitfarms’ shares by issuing new shares to dilute any entity’s stake. Riot’s CEO, Jason Les, celebrated the tribunal’s decision as a win for Bitfarms’ shareholders, criticizing the initial poison pill as a sign of poor corporate governance.
Following the tribunal’s ruling, Bitfarms quickly adopted a new shareholder rights plan to protect against “creeping” bids. This plan activates if any entity accumulates over 20% of Bitfarms’ shares without board approval. Effective for six months, the plan allows existing shareholders to purchase shares at a significant discount if a takeover attempt occurs, diluting the acquirer’s stake. Brian Howlett, the lead director of Bitfarms’ board, defended the new plan, stating it ensures fair treatment for all shareholders and counters Riot Platforms’ opportunistic acquisition attempts.
Corporate Governance and Leadership Changes
In June, Riot Platforms disclosed a 14.9% stake in Bitfarms and made a $950 million buyout offer, valuing Bitfarms at $2.30 per share, a 24% premium over its recent average share price. Bitfarms rejected the offer, arguing it undervalued the company. Riot Platforms then launched a website addressing corporate governance concerns at Bitfarms and outlining its plans for board restructuring.
Riot Platforms has been vocal about Bitfarms’ governance issues, especially after former CEO Geoffrey Morphy’s resignation in May and subsequent lawsuit against the company. Nicolas Bonta has been serving as interim president and CEO, a position Riot Platforms believes should be reconsidered due to governance concerns. In response, Bitfarms appointed Fanny Philip, an expert in blockchain technology and finance, as an independent board member as part of its strategic shift amid the ongoing conflict with Riot Platforms.
Operational Updates
Bitfarms operates 12 Bitcoin mining facilities across Canada, the United States, Paraguay, and Argentina. Despite corporate challenges, the company reported a 21% increase in Bitcoin production in June 2024, mining 189 BTC, amid the Bitcoin halving event in April that reduced block rewards by 50%.
Simultaneously, Riot Platforms acquired Block Mining on July 24 for $92.5 million, significantly increasing its operational capacity and geographical reach. The acquisition, funded with $18.5 million in cash and $74 million in common stock, includes 60 megawatts (MW) of current operational capacity with plans to expand to 110 MW by the end of 2024, and potential growth to over 300 MW in Kentucky. This purchase will immediately boost Riot’s self-mining hash rate by 1 EH/s, with potential growth to 16 EH/s by 2025.
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