As a researcher with experience in corporate finance and mergers and acquisitions, I believe that Bitfarms’ decision to implement a poison pill strategy in response to Riot Platforms’ unsolicited takeover offer is a prudent move. The poison pill strategy is a common defensive measure used by companies to protect their shareholder value and strategic alternatives when facing a hostile takeover attempt.
On Monday, Bitfarms disclosed that its Board of Directors had reached a consensus to implement a shareholder rights plan straightaway. This move aims to protect the value of the company during its ongoing strategic review, prompted by an uninvited acquisition proposal from Riot Platforms Inc.
The so-called “poison pill” strategy aims to protect Bitfarms’ shareholders by making it difficult for any single entity to seize control without offering a reasonable compensation to all stakeholders.
‘Poison pill’ Strategy
One way to rephrase this in clear and conversational language is: A poison pill strategy is a defensive tactic employed by companies to thwart unwanted takeovers by significantly increasing the cost for the acquiring company. For instance, Bitfarms announced its intention to issue new shares to existing shareholders, thereby reducing the control of any potential hostile buyer.
With the Rights Plan in effect, each holder of a common share will receive one right. These rights will only become activatable if a person or entity amasses 15% or more of Bitfarms’ outstanding common shares without adhering to the plan’s “Permitted Bid” stipulations.
As a crypto investor, I’m required to submit allowed bids to every fellow shareholder under the given terms. These bids should remain open for a period of 105 days. Additionally, there are specific conditions that these bids must meet. However, it is important to note that even though the Rights Plan is active right away, it still necessitates approval from shareholders within the next six months.
I’ve learned that Bitfarms announced the Toronto Stock Exchange (TSX) has postponed its review of the Rights Plan until they receive confirmation from the securities commission that no intervention is necessary. This delay does not impact the plan’s implementation or functionality, which will continue to be in effect for a minimum six-month period starting June 10, unless terminated prematurely.
Riot’s Takeover Plans
In May, Riot Platforms announced their unexpected bid to acquire Bitfarms for approximately $950 million. They also disclosed their plan to call for a special shareholders’ gathering with the purpose of appointing new, independent members to the Bitfarms board.
After Bitfarms declined Riot’s attempt to acquire the company in April, Riot had proposed a deal worth $2.30 per share, which was a combination of cash and stocks. This represented a 20% increase over Bitfarms’ share price prior to the offer.
After carefully considering Riot’s proposal, Bitfarms’ independent director committee determined that the offer underestimated the company’s value and future possibilities.
As a crypto investor, I’m excited to share that on May 28, I became the largest shareholder of Bitfarms after acquiring a 9.25% stake in the company. To further boost my position, I purchased an additional 1.5 million shares on June 5, bringing my total ownership to roughly 12%. By this date, I beneficially owned around 47.83 million Bitfarms shares.
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2024-06-12 07:14