Canadian Tribunal Blocks Bitfarms’ Poison Pill Plan Amid Riot’s Takeover Bid

A Canadian tribunal has put an end to bitcoin mining firm Bitfarm’s defensive “poison pill” strategy, aimed at blocking a takeover attempt by rival firm Riot Platforms. On July 24 the Ontario Capital Markets Tribunal issued a cease trade order, therefore instantly ending Bitfarms’ scheme.

Background

Bitfarms, a significant player in the Bitcoin mining industry, operates 12 mining facilities across four countries: Canada, the United States, Paraguay, and Argentina. Recently, the firm has had internal difficulties including the departure of its former CEO Geoffrey Morphy. Morphy resigned in May and later sued the company.

The very same month, Riot Platforms made a bid of $950 million to buy Bitfarms Ltd. The latter called this attempt by Riot, which already holds a 14% stake in Bitfarms, a “hostile takeover.”

Riot Platforms continued to purchase Bitfarms shares in the open market. Bitfarms responded by implementing a poison pill plan meant to stop Riot from acquiring a controlling share. Businesses sometimes use this approach to prevent hostile takeovers, allowing current board members to purchase extra shares at a big discount therefore diluting the acquirer’s ownership.

A Stop on Bitfarms’ Plan

Bitfarms’ plan stated that if any entity acquired more than 15% of the company’s outstanding shares before September 10, new shares would be issued to other existing shareholders, thereby diluting the acquiring entity’s ownership. However, this strategy was brought to an abrupt halt by the tribunal’s ruling in favor of Riot’s application to cease trade in the poison pill plan.

“This ruling from the Tribunal in favor of Riot’s application is a win for all Bitfarms shareholders,” said Jason Les, CEO of Riot Platforms, in a statement. Les criticized Bitfarms’ adoption of the poison pill, describing it as a symptom of the “broken corporate governance” within Bitfarms and an attempt by its directors to entrench themselves.

A New Poison Pill

Riot Platforms is now pushing for significant changes in Bitfarms’ governance, advocating for the election of its three director nominees, John Delaney, Amy Freedman, and Ralph Goehring, to Bitfarms’ board at the next shareholder meeting scheduled for October 29.

In contrast, Bitfarms’ lead director Brian Howlett defended the rights plan, stating it aimed to “preserve the integrity” of alternative takeover processes amidst Riot’s opportunistic purchase attempt. Following the tribunal’s decision, Howlett announced that Bitfarms has adopted a new Poison Pill to protect the interests of all shareholders.

Notably, despite the ongoing struggle, Bitfarms reported that it produced 21% more Bitcoin in June. The company currently has 905 BTC in its treasury, worth around $57 million.