Bitfarms Rejects Riots Acquisition Proposal Implements Poison Pill Plan to Combat Hostile Takeover Companys Value Severely Underestimated
With the conclusion of Bitfarms’ annual shareholders meeting, the company announced the adoption of a so-called Poison Pill plan to dilute equity and prevent a hostile takeover bid from another mining company, Riot, which it strongly opposes, stating that it severely undervalues the company’s potential prospects. However, other mining companies also seem to be watching closely.
Bitfarms Implements Poison Pill Plan, Opposes Riot’s Hostile Takeover
Bitfarms: Severe Undervaluation of Company’s Growth Prospects
Are there other competitors?
Mining Company Mergers and Acquisitions May Be Inevitable
Within days of the end of Bitfarms’ annual shareholders meeting, the company announced the implementation of a Shareholder Rights Plan, also known as a Poison Pill, to counter Riot’s hostile takeover actions. The Shareholder Rights Plan serves as a defense mechanism against takeovers, triggering when the acquiring company holds more than a certain percentage of the target company’s shares (usually 10% to 20%), allowing existing shareholders to acquire a large number of shares at a lower price, thus increasing the cost for the acquiring party.
The statement indicated that the Shareholder Rights Plan stipulates that if a specific company becomes a holder of over 15% of Bitfarms by September 20, and increases its stake to 20% without board approval, other shareholders can purchase common stock at a price significantly below market value:
Currently, the adoption of the Shareholder Rights Plan by Bitfarms is necessary to ensure that the board has sufficient opportunity and time to negotiate, propose, and review strategic alternatives, thus providing maximum value to Bitfarms’ shareholders.
Bitfarms: Severe Undervaluation of Company’s Growth Prospects
In April of this year, Bitfarms experienced the removal of former CEO Geoffrey Morphy and the appointment of co-founder Nicolas Bonta. Subsequently, Riot privately presented a takeover proposal to Bitfarms’ board, which was rejected, prompting a change in strategy:
Riot plans to purchase the remaining shares of the company at a price of $2.30 per share, requesting a special meeting of Bitfarms shareholders to add new independent directors to the board.
Currently, Riot’s stake in Bitfarms has increased from 3.61% to 12%. Bitfarms claimed in a press release yesterday that the offer severely undervalued the company’s potential growth prospects:
The special committee conducted a comprehensive review of the proposal and found it to severely undervalue the company and its growth prospects.
Furthermore, Compass Point analyst Joe Flynn stated to Blockworks last week that Bitfarms’ attractive mining infrastructure may attract interest from many mining companies:
Riot does not seem to be the only company with the opportunity to acquire Bitfarms; well-capitalized mining companies such as Marathon Digital and CleanSpark may also be observing.
Bitfarms also acknowledged receiving interest from many companies in acquiring the company:
The internal committee is considering various options, including continuing business operations or selling the company.
With Bitcoin completing its fourth halving in April this year, the profitability of major mining companies has significantly declined over the past two months. Data from The Block shows that the average daily income of Bitcoin miners in the past month is approximately $35 million, a decrease of over 50% compared to the halving day.
Amid the increasingly challenging industry environment and competition due to Bitcoin halving, mining companies seem to be inevitably facing further mergers and acquisitions to survive these difficult times without hype. This potential Bitfarms acquisition is a representative case of this trend.
