Bitcoin miner Bitfarms has taken a defensive measure to avoid a hostile takeover by rival Riot Platforms. According to Reuters, Bitfarms announced on Monday that it has authorized the use of a “poison pill” to thwart Riot Platforms’ possible hostile takeover bid.
As per Bitfarm’s plan, if an entity gains above 15% of Bitfarm’s stake after June 20 and until September 10, the business would issue new shares, therefore diluting the holding of the entity.
The report also highlighted that Bitfarms believes that the shareholder rights plan aimed to preserve the integrity of its previously announced strategic alternatives review process.
Riot Platforms’ Takeover Plan For Bitfarms
In the shaky aftermath of the halving, Riot Platforms had made a takeover bid on cryptocurrency company Bitfarms. With the current valuation of US$950 million, Riot had offered to purchase all of Bitfarms Ltd.’s outstanding shares for US$2.30 per Bitfarms ordinary share.
The halving of mining rewards, the rise in mining difficulty, and the sleek new bitcoin exchange-traded funds (ETFs) that are stealing investor money have made this year miserable for cryptocurrency miners. As Bankless Times had previously mentioned, although the value of Bitcoin has risen by 60% to $67,859 since it peaked in March, the value of two of the biggest U.S.-listed miners, Marathon Digital and Riot Platforms, have dropped by about 10%, and 33%, respectively, so far this year.
While some larger miners, like Riot, have been able to retain cash flow and thrive after the halving, many smaller miners have less access to financing and less negotiation power with electricity companies.
Bitfarms Takes A Poison Pill
With the hostile takeover on its head, Bitfarms has taken a shareholder rights plan step, which in the language of mergers and acquisitions is also called a poison pill.
The concept of acquiring a majority stake unfavorable for the buyer is the source of the term “poison pill.” An individual or entity attempting to take over a corporation through hostile means is discouraged from doing so by the use of poison pills.
The plan enables shareholders to purchase additional shares of the company at a steep discount once it is triggered, except for the acquiring party. Making the expense of purchasing the company greater than the benefit is the goal of a poison pill defense.
The step is still in consideration and whether or not Bitfarms succeeds in blocking the Riot deal or Riot’s takeover plan is deemed successful is something market participants will eagerly watch out for.
