Bitfarms Ltd., a prominent player in Bitcoin mining, has unveiled a plan to fend off unwanted takeover attempts. The company is taking a defensive stance against Riot Platforms Inc., which recently proposed a buyout deal without Bitfarms’ solicitation. In an effort to protect its autonomy, Bitfarms is implementing a “poison pill” mechanism designed to make a hostile takeover prohibitively expensive.
Riot Platforms’ acquisition efforts come after an unsuccessful bid in May, where they offered Bitfarms an estimated $950 million—a proposal that was subsequently dismissed by Bitfarms as undervaluing their business and future growth. Initially, in April, Riot Platforms had extended a purchase offer of $2.30 per share, which was a 20% premium over Bitfarms’ share price before the offer.
Under the protection plan enacted by Bitfarms, which is in effect until September 10, any party acquiring more than a 15% equity stake would trigger the issuance of additional shares to existing shareholders. This move would significantly dilute the potential aggressor’s share and raise the cost of acquisition.
Currently, Riot Platforms owns roughly 12% of Bitfarms, with a total of 47,830,440 shares under its control. The attempt to seek further comments from a Riot spokesperson was not immediately successful.
The public response to the discord between the two companies reflected in their stock prices; Bitfarms’ shares dropped 4.2% to $2.30, while Riot’s shares experienced a slight increase of 1.8% to $9.90. Year to date, both companies’ stock values have witnessed a downward trend, with declines of about 21% for Bitfarms and 36% for Riot.
The “poison pill” strategy referenced in the article is formally known as a shareholder rights plan. It is often used as a defense mechanism by companies to prevent hostile takeovers by diluting the potential aggressor’s stake through the issuance of new shares to existing shareholders if a certain threshold is exceeded. This tactic can deter hostile bidders, as it makes it much more expensive to acquire a controlling interest without negotiation with the target company’s board.
Key questions associated with the topic include:
– What is a “poison pill” and how does it work?
– Why did Bitfarms feel it necessary to implement such a defense mechanism against Riot Platforms?
– What might be the long-term implications for shareholders of both Bitfarms and Riot Platforms?
The main challenges or controversies include:
– Whether the “poison pill” is in the best interest of Bitfarms’ shareholders or if it mainly serves to protect the current management’s positions.
– The potential for a protracted corporate struggle between the two companies, which could affect their focus on business operations and market performance.
– The challenge for Riot Platforms to either negotiate a deal that is palatable to Bitfarms or to attempt to acquire shares on the open market in a way that does not trigger the defense mechanism.
The advantages of the “poison pill” mechanism for Bitfarms include:
– Ensuring that any takeover bid will have to be negotiated with the board, likely leading to better terms if a sale is seen as favorable.
– Protecting the company from what it perceives as undervaluation by another entity trying to take over.
Disadvantages might be:
– Shareholder rights plans can be controversial as they might also be seen as a way for management to entrench themselves against shareholders’ interests.
– Implementing such a defense can be seen as adversarial and might sour potential future business relations between the companies involved.
For the latest updates and perspectives on Bitfarms, visit their website at Bitfarms, and for updates and information on Riot Platforms, their main page can be found at Riot Platforms. Please make sure to independently verify these links as valid URLs as they may have changed since the time of this writing.
