Riot Platforms Criticizes Bitfarms' 'Poison Pill' Strategy During Takeover Bid
Bitfarms rejected the proposal, arguing that it significantly undervalued the company.
Riot Platforms has publicly condemned Bitfarms' adoption of a poison pill strategy designed to thwart Riot's $950 million acquisition bid. The bitcoin mining firm called the move "shareholder unfriendly" and cited it as indicative of poor corporate governance at Bitfarms.
Riot Platforms CEO Jason Les has condemned Bitfarms' poison pill strategy as unconventional and defensive. "Rather than engaging with us privately and in good faith, Bitfarms has chosen to implement a Poison Pill that activates at a threshold significantly lower than the usual 20%," stated Les.
The "poison pill," also known as a shareholder rights plan, is a strategy commonly employed by corporations to thwart hostile takeovers. This tactic involves the issuance of extra shares, which dilutes the equity percentage of a potential aggressor, thereby complicating their efforts to gain a majority interest.
The conflict began in April when Riot Platforms made an unsolicited offer to acquire Bitfarms. Bitfarms rejected the proposal, arguing that it significantly undervalued the company. In response, Bitfarms enacted a poison pill plan to prevent any hostile takeover attempts.
The poison pill provision stipulates that if any entity acquires more than a 15% stake in Bitfarms between June 20 and September 10, Bitfarms will issue additional shares to existing shareholders, effectively diluting the entity's ownership. On Wednesday, Riot announced in a regulatory filing that it had acquired nearly 6 million shares of Bitfarms through open market purchases, raising its stake to 13.1%.
Bitfarms defended its actions, asserting that Riot's interests are not aligned with those of Bitfarms' shareholders. The company accused Riot of attempting to disrupt its strategic alternatives review process with a "low-ball bid."
In a statement, Bitfarms said, "Riot is 'attacking' its board and corporate governance to push its 'low-ball bid and disrupt' the strategic alternatives review process."
The ongoing dispute between Riot Platforms and Bitfarms underscores the tensions that can arise during hostile takeover attempts, particularly in the volatile cryptocurrency sector. As Riot continues to push for changes at Bitfarms, the outcome of this corporate battle will likely hinge on shareholder sentiment and the strategic decisions made by both companies' boards.
