Bitfarms Adopts Poison Pill to Counter Riot's $950M Hostile Takeover Bid

Bitfarms adopts poison pill to counter Riot's $950 million hostile takeover bid, triggering stock dilution above 15% stake.

By Alex P. Chase

6/10, 16:28 EDT
Bitcoin / U.S. dollar
Bitfarms Ltd.
Riot Blockchain, Inc

Key Takeaway

  • Bitfarms adopts a "poison pill" strategy to thwart Riot Platforms' $950 million hostile takeover bid, which it deems undervalued.
  • Riot's offer included $2.30 per share in cash and stock, 20% above Bitfarms' pre-offer trading price.
  • Following the news, Bitfarms shares fell 4.2% to $2.30, while Riot shares rose 1.8% to $9.90 on Monday.

Bitfarms Adopts Poison Pill Strategy

Bitcoin mining company Bitfarms Ltd. has announced the adoption of a "poison pill" shareholder rights plan in response to an unsolicited takeover bid from larger rival Riot Platforms Inc. The poison pill strategy is designed to prevent hostile takeovers by making the acquisition prohibitively expensive for the acquiring company. According to Bitfarms' statement on Monday, if any entity acquires more than a 15% equity stake by September 10, the company will issue new stock to existing shareholders, thereby diluting the stake of the entity attempting the takeover.

Riot Platforms' Takeover Bid

Riot Platforms made an unsolicited $950 million offer in May to acquire Bitfarms after the smaller Bitcoin miner rejected an earlier approach in April. Riot's initial private proposal offered $2.30 per share in cash and stock, which was approximately 20% above Bitfarms' trading price at the time. However, Bitfarms' board determined that the proposal "significantly undervalues" the company and its growth prospects. Riot currently owns 47,830,440 shares of Bitfarms, representing about 12% of the issued and outstanding stock, as disclosed on June 5.

Market Reactions and Strategic Review

Following the announcement of the poison pill strategy, shares of Bitfarms fell 4.2% to $2.30, while Riot's shares increased by 1.8% to $9.90 on Monday. Year-to-date, Bitfarms' stock has declined around 21%, and Riot's stock has slumped approximately 36%. The adoption of the poison pill is part of Bitfarms' broader strategic alternatives review process, which was initiated last month after receiving Riot's proposal. This review includes exploring potential mergers or the sale of the company.

Management Quotes

  • Bitfarms Ltd.:

    "The proposal significantly undervalues the company and its growth prospects."