Bitfarms rejects Riot's acquisition proposal, implements poison pill plan to deter takeover: Company says offer severely undervalues its worth

Following the conclusion of Bitfarms' annual shareholders meeting, the company announced the adoption of a stock dilution anti-takeover measure commonly known as the Poison Pill plan, openly expressing strong opposition to the acquisition proposal from another mining company, Riot, stating that it severely undervalues the company's potential prospects. However, it appears that other mining companies are also keeping a close eye on the situation.

Bitfarms Implements Poison Pill Plan to Thwart Riot's Hostile Takeover

Just days after its annual shareholders meeting, Bitfarms announced the implementation of a Shareholder Rights Plan, also known as a poison pill plan, aimed at thwarting Riot's hostile acquisition attempt.

The Shareholder Rights Plan is a type of anti-takeover measure that triggers when a potential acquirer accumulates a certain percentage of the target company's shares, typically between 10% and 20%, allowing existing shareholders to purchase additional shares at a discounted price, thus increasing the cost for the acquirer.

The plan states that if a specific entity becomes a holder of over 15% of Bitfarms before September 20 and increases its stake to 20% without board approval, other shareholders can purchase common shares at a significantly lower price:

The implementation of the Shareholder Rights Plan is deemed necessary to ensure that the board has adequate time and opportunity to negotiate, propose, and review strategic alternatives, maximizing value for Bitfarms shareholders.

Bitfarms: Undervalued Growth Potential

In April this year, Bitfarms underwent the removal of former CEO Geoffrey Morphy and the appointment of co-founder Nicolas Bonta as his successor.

Subsequently, Riot privately proposed an acquisition to Bitfarms' board, which was rejected, leading the company to shift its strategy:

Riot plans to acquire the remaining shares of the company at $2.30 per share, requesting a special meeting of Bitfarms shareholders to add new independent directors to the board.

Currently, Riot's ownership in Bitfarms has increased from 3.61% to 12%.

In a recent press release, Bitfarms claimed that the offer severely undervalues the company's potential for growth:

The Special Committee has conducted a comprehensive review of the proposal and believes it significantly undervalues the Company and its growth prospects.

Additionally, "Riot has declined to engage in further discussions or negotiations and has instead chosen to continue acquiring common shares in the market, prompting the committee to believe that it is necessary to defend the company's interests by implementing the Shareholder Rights Plan."

Other Competitors in the Mix?

Furthermore, Compass Point analyst Joe Flynn suggested to Blockworks last week that Bitfarms' attractive mining infrastructure may attract interest from various mining companies:

Riot may not be the only potential acquirer of Bitfarms, as well-capitalized miners like Marathon Digital and CleanSpark could also be eyeing the company.

In response, Bitfarms acknowledged interest from several companies:

The internal committee is considering various options, including continuing operations or selling the company.

Mining Industry Consolidation Likely on the Horizon

With Bitcoin's fourth mining reward halving in April this year, major mining companies have seen a significant decline in profitability over the past two months.

The Block data shows that the average daily revenue for Bitcoin miners in the last month is around $35 million, a reduction of over 50% compared to the halving day.

Given the increasingly challenging industry environment post-Bitcoin halving and heightened competition, mining companies seem poised for further consolidation to weather the tough times, with the potential Bitfarms acquisition being a notable case in point.