Bitfarms Unveils Strategic ‘Poison Pill’ Amid Hostile Takeover from Riot Platforms

In an unprecedented strategic maneuver, Bitcoin mining giant Bitfarms has unveiled a novel ‘poison pill’ defense following the Ontario Capital Markets Tribunal’s cessation of its initial deterrent against an aggressive takeover by competitor Riot Platforms.

Tribunal Ruling and Counteraction to ‘Creeping’ Acquisitions

The Ontario Capital Markets Tribunal recently nullified Bitfarms’ primary poison pill tactic, rendering it ineffective. This original shareholder rights plan, conceived in early June, sought to obstruct Riot Platforms from amassing over 15% of Bitfarms’ shares. The initial strategy was designed to issue new shares to dilute any entity that accumulated more than 15% of the company’s stake.

Riot Platforms’ CEO, Jason Les, heralded the tribunal’s ruling as a triumph for Bitfarms’ shareholders, lambasting the initial poison pill as indicative of defective corporate governance. “This is a victory for the shareholders,” Les proclaimed.

Read more: Significant Drop in Bitcoin Mining Difficulty Mirrors FTX Collapse, CryptoQuant Reports

Deployment of Enhanced Defense Mechanism

Bitfarms’ newly instituted poison pill will activate if any entity surpasses a 20% share threshold without board sanction. This measure, effective for six months, empowers current shareholders to purchase shares at a marked discount in the event of a takeover bid, thereby diluting the acquirer’s holdings.

Brian Howlett, lead director of Bitfarms’ board, defended this revamped strategy, asserting it is essential for equitable shareholder treatment and countering Riot Platforms’ opportunistic acquisition endeavors. “This plan is crucial for maintaining fair treatment and integrity in alternative takeover processes,” Howlett stated.

Corporate Governance and Strategic Leadership

In June, Riot Platforms disclosed a 14.9% stake in Bitfarms and proposed a $950 million buyout, valuing Bitfarms at $2.30 per share—a 24% premium over its recent average share price. Bitfarms rebuffed the offer, deeming it undervalued.

Subsequently, Riot Platforms launched a website to address Bitfarms’ corporate governance deficiencies and proposed a board restructuring. The platform has been outspoken about Bitfarms’ governance flaws, particularly following the resignation of former CEO Geoffrey Morphy and his subsequent litigation against the company.

Nicolas Bonta currently serves as interim president and CEO, a role Riot Platforms believes should be reevaluated due to governance issues. In a strategic shift, Bitfarms appointed Fanny Philip, an expert in blockchain technology and finance, as an independent board member amid the ongoing internal discord with Riot Platforms.

Operational and Production Growth

Despite the corporate turbulence, Bitfarms reported a substantial 21% increase in Bitcoin production in June 2024, with 189 BTC mined. This growth follows the Bitcoin halving event in April, which halved block rewards.

Simultaneously, Riot Platforms acquired Block Mining for $92.5 million, substantially enhancing its operational capacity and geographical reach. Funded with $18.5 million in cash and $74 million in common stock, the acquisition 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 acquisition is poised to immediately augment Riot’s self-mining hash rate by 1 EH/s, with potential growth to 16 EH/s by 2025.