Bitfarms, a Bitcoin mining company, has recently implemented a shareholder rights plan just 10 days after its Annual General and Special Meeting. This plan is aimed at allowing Riot Platforms to potentially proceed with a hostile takeover attempt, but only under certain limited conditions.
Under the shareholder rights plan, if an individual and their associates were to acquire 15% of Bitfarms’ shares by September 20 and then increase their ownership to 20% without approval from the board, other shareholders would have the opportunity to buy common shares at a discounted price compared to the market value at that time.
Bitfarms and Riot are engaging in a strategic game of hardball. While a takeover bid would be permissible under Canadian law after this process, the bidder’s share would be diluted in the interim.
Riot had previously put forth a takeover proposal in April, which was rejected by Bitfarms’ board without substantial discussion. Bitfarms, on the other hand, stated that they welcomed Riot’s interest in the company but felt that the offer undervalued their shares. This led Riot to alter its approach and retract its initial proposal.
Riot had managed to increase its stake in Bitfarms from 3.61% to 11.62% prior to the shareholders meeting, where Bitfarms co-founder Emiliano Grodzki lost his board seat. Riot had raised concerns about Grodzki and Nicholas Bonta’s actions and whether they were acting in the best interests of all shareholders.
Despite Bonta being reelected as board chair with a significant majority, Bitfarms acknowledged that certain proxy advisory firms’ concerns about independence may have contributed to Grodzki’s failure to be reelected.
Riot Platforms had planned to call for another shareholders meeting following the May 31 meeting to appoint additional board members. In response, Bitfarms criticized this move as an attempt by Riot Platforms to bypass and obstruct the board’s evaluation process regarding the company’s potential sale.
In the world of cryptocurrency in Toronto, Bitfarms and Riot Platforms are locked in a strategic battle for control.