As the annual shareholder meeting of mining company Bitfarms concluded, the company announced the implementation of a stock dilution anti-takeover measure known as a Poison Pill, publicly expressing strong opposition to the acquisition proposal from another mining company, Riot, stating that it severely undervalued the company’s potential prospects. However, other mining companies also seem to be eyeing the situation.
Bitfarms implemented the Poison Pill plan to oppose Riot’s hostile takeover. The Shareholder Rights Plan is designed as a defense against takeovers and is also known as a poison pill plan. Once an acquiring company holds a certain percentage of the target company’s shares (usually 10% to 20%), this triggers the provision, allowing existing shareholders to purchase a large number of shares at a lower price, thereby increasing the acquirer’s costs.
The statement indicated that under the Shareholder Rights Plan, if a specific company becomes a holder of over 15% of Bitfarms by September 20 and increases its stake to 20% without board approval, other shareholders can purchase common stock at a significantly lower price than the market value.
Currently, Bitfarms’ adoption of the Shareholder Rights Plan is necessary to ensure that the board has sufficient opportunity and time to negotiate, propose, and review strategic alternatives, providing maximum value to Bitfarms’ shareholders.
Bitfarms: Severely Undervalued Company’s Growth Prospects
In April of this year, Bitfarms experienced the removal of former CEO Geoffrey Morphy and the appointment of co-founder Nicolas Bonta. Riot subsequently privately proposed an acquisition to Bitfarms’ board, which was rejected. The company then changed its strategy.
Riot plans to purchase the remaining shares of the company at a price of $2.30 per share, requesting a special meeting of Bitfarms shareholders to add new independent directors to the board.
Currently, Riot’s stake in Bitfarms has increased from 3.61% to 12%.
In a press release yesterday, Bitfarms claimed that the offer severely undervalued the company’s potential growth prospects. The Special Committee conducted a comprehensive evaluation of the proposal and believes it severely undervalues the company and its growth prospects.
Moreover, Compass Point analyst Joe Flynn stated last week to Blockworks that Bitfarms’ attractive mining infrastructure may attract the attention of many mining companies. Riot is not the only company with the opportunity to acquire Bitfarms; well-capitalized mining companies like Marathon Digital and CleanSpark may also be observing.
In response, Bitfarms acknowledged receiving interest from several companies in the company, stating that the internal committee is considering various options, including continuing operations or selling the company.
With Bitcoin completing its fourth halving in April this year, the profitability of major mining companies has significantly decreased over the past two months.
According to data from The Block, the average daily income of Bitcoin miners in the past month is around $35 million, a decrease of over 50% compared to the halving day.
Due to the increasingly challenging industry environment and competition after the Bitcoin halving, mining companies seem to be facing further mergers and integrations to survive this bleak period lacking speculation. This potential Bitfarms acquisition case is a representative example.