Bitfarms tries to block Riot Platforms hostile takeover with 'poison pill' approach

Bitcoin miner Bitfarms is adopting a "poison pill" to prevent possible takeover from peer and rival Riot Platforms.

"Under Bitfarm's plan, if an entity accumulates more than 15% of Bitfarms' stake after June 20 and up to Sept. 10, the company would issue fresh shares, diluting the entity's stake," according to Reuters. "After Sept. 10, the threshold would be relaxed to 20% if any takeover attempt meets certain conditions."

Bitfarms said the plan, approved by the board of directors, "is being adopted to preserve the integrity of our previously announced strategic alternatives review process and is in the best interests of shareholders."

A shareholder rights plan, also known as a "poison pill," is a company’s defense against an unsolicited takeover and attempts to make the company less desirable or dilute an acquirer’s ownership of the takeover target.

Bitfarms rejected a nearly $1 billion acquisition proposal from Riot Platforms in April. Riot wanted to buy Bitfarms' outstanding shares at $2.30 a piece, a 24% premium on the one-month weighted average per share. Bitfarms said the deal undervalued the company.

On May 28, Riot purchased a 9.25% stake in Bitfarms, making it the largest shareholder in the firm. Riot bought another 1.5 million shares on June 5 to raise its stake to about 12%. Riot still intends to call a special meeting of Bitfarms’ shareholders to add new, independent directors to the Bitfarms board.

On May 13, Bitfarms axed former CEO Geoffrey Morphy after he filed a $27 million suit against the firm for alleged breach of contract, wrongful dismissal and aggravated and punitive damages, The Block previously reported.

Post-halving mining revenue drops

Bitcoin miners have been releasing their production updates for May, the first full month since the latest Bitcoin halving event. To make up for lost revenue, some are making significant moves through strategic deals and diversifications.

Bitfarms said it earned 156 BTC in May, a 42% drop from the previous month and down 66% year over year. Bitfarm’s total amount of BTC held in treasury increased to 850 BTC, representing $57.2 million based on a BTC price of $67,300 on May 31.

Bitfarms' Nasdaq-traded stock was down 1.6% at publication time, according to Yahoo Finance. The share price has dropped 17% in the year-to-date period.