After concluding its annual shareholders' meeting, Bitcoin mining company Bitfarms announced this Monday (10th) that it will implement a Shareholder Rights Plan to fend off a hostile takeover by its competitor Riot Platforms.
What is a Poison Pill Plan? According to Bitfarms' statement, this Shareholder Rights Plan, also known as a Poison Pill Plan, is an anti-takeover measure. Once the acquiring company holds more than a certain percentage of the target company's shares (usually 10% to 20%), the clause will take effect, allowing existing shareholders to purchase a large number of shares at a lower price, thereby increasing the acquisition cost for the acquirer. The statement from Bitfarms reads:
"The Shareholder Rights Plan stipulates that if a specific company becomes a holder of more than 15% of Bitfarms' shares before September 20 and increases its shares to 20% without board approval, other shareholders will be able to purchase common stock at a price far below the market price."
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 to provide maximum value for Bitfarms' shareholders.
The plan has already been approved by Bitfarms' board of directors.
Riot Platforms Becomes Bitfarms' Largest Shareholder It is understood that Bitfarms' implementation of this Poison Pill Plan can be traced back to April this year when Riot Platforms made a takeover proposal to Bitfarms.
In April this year, Riot Platforms held only 3.61% of Bitfarms' shares. After Bitfarms experienced a CEO change, Riot Platforms privately proposed an acquisition to Bitfarms' board.
After being rejected by Bitfarms, Riot Platforms changed its strategy, acquiring a large number of all circulating shares of the company at a price of $2.3 per share, while requesting a special meeting of Bitfarms' shareholders to add new independent directors to the board, claiming:
"Bitfarms' board of directors has not sought maximum benefit for shareholders."
In response, Bitfarms' board established a special committee to evaluate Riot Platforms' acquisition offer. After careful consideration, the special committee concluded that Riot Platforms' offer significantly undervalued the company and rejected the nearly $1 billion acquisition proposal.
However, this did not stop Riot Platforms' ambitions. On May 28, they acquired 9.25% of Bitfarms' shares, becoming the company's largest shareholder. Then on June 5, Riot bought 1.5 million shares, raising its stake to about 12%.
Bitfarms Attracts More Than One Acquirer In fact, besides Riot Platforms, more than one mining company seems to be interested in Bitfarms. According to a report by Blockworks last week, Compass Point analyst Joe Flynn pointed out that Bitfarms' attractive mining infrastructure could draw the attention of many mining companies:
"Riot Platforms does not appear to be the only company with the opportunity to acquire Bitfarms. Capital-rich miners such as Marathon Digital and CleanSpark may also be watching."
In response, Bitfarms also acknowledged receiving interest from many companies:
"An internal committee is considering various options, including continuing business operations or selling the company."
Pressure on Miners Increases Post-Bitcoin Halving Following the fourth Bitcoin halving on April 20, the daily average revenue of Bitcoin miners has dropped to about $35 million over the past month, compared to halving day when transaction fees surged due to the Ordinals Protocol craze, cutting revenue in half.
In this context, if Bitcoin prices continue to decline, the pressure on crypto mining companies will increase. For Bitfarms, its May profit was only 156 BTC, down 42% from April and 66% from the same period last year.
Nishant Sharma, founder of BlocksBridge Consulting, pointed out:
"Due to increased competition and a tougher environment following the Bitcoin halving, the mining industry is indeed undergoing consolidation."
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