Bitcoin mining company Bitfarms (BITF.TO) announced on Monday its decision to implement a “poison pill” strategy to safeguard against a potential hostile takeover by competitor Riot Blockchain (RIOT.O).
This action follows Riot Blockchain’s recent disclosure of acquiring a 12% stake in Bitfarms as part of its takeover efforts. Despite Riot’s initial private proposal in April, which was rejected by Bitfarms’ board citing undervaluation, Riot proceeded to publicly offer approximately $950 million for the bitcoin miner in May. Additionally, Riot intends to seek a special shareholder meeting to appoint independent directors to Bitfarms’ board.
Bitfarms’ premarket trading shares experienced a 2.5% decline following the announcement.
Under Bitfarms’ plan, should an entity accumulate more than 15% of its stake between June 20 and September 10, the company will issue additional shares, diluting the entity’s ownership. After September 10, the threshold will relax to 20%, subject to certain conditions for any takeover attempt.
The implementation of a shareholder rights plan, often referred to as a “poison pill,” is a defensive measure used by corporate boards to thwart hostile takeover attempts.
Bitfarms clarified that the purpose of the shareholder rights plan is to maintain the integrity of its ongoing strategic alternatives review process, which commenced after receiving Riot’s proposal. This review encompasses potential merger or sale options for the company.
