Following the conclusion of Bitfarms’ annual shareholder meeting, the company announced the adoption of a stock dilution anti-takeover measure commonly known as a Poison Pill plan, publicly expressing strong opposition to the acquisition proposal from another mining company, Riot, stating that it seriously undervalued the company’s potential prospects. However, it seems that other mining companies are also keeping a close eye on the situation.
Bitfarms Implements Poison Pill Plan, Opposes Riot’s Hostile Takeover
Bitfarms: Company’s Growth Prospects Severely Undervalued
Are There Other Competitors?
Mining Company Mergers and Acquisitions Likely Inevitable
Within days of the conclusion of Bitfarms’ annual shareholder meeting, the company announced the implementation of a Shareholder Rights Plan, aimed at opposing Riot’s hostile acquisition actions. The Shareholder Rights Plan, also known as a Poison Pill plan, serves as 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 provision is triggered, allowing existing shareholders to purchase a large number of shares at a lower price, thereby increasing the cost for the acquiring party.
The statement indicated that the Shareholder Rights Plan stipulates that if a specific company becomes a holder of over 15% of Bitfarms by September 20th and increases its holdings to 20% without board approval, other shareholders can purchase common shares at a price far below the market value.
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 alternative plans, providing the maximum value to Bitfarms’ shareholders.
Bitfarms: Company’s Growth Prospects Severely Undervalued
In April of this year, Bitfarms experienced the removal of former CEO Geoffrey Morphy and the appointment of co-founder Nicolas Bonta as his successor. Riot subsequently privately made an acquisition proposal 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%. Bitfarms claimed in a press release yesterday that the offer severely undervalued the company’s potential growth prospects.
Furthermore, analyst Joe Flynn from research firm Compass Point stated last week to Blockworks that Bitfarms’ attractive mining infrastructure may attract the attention of many mining companies. Riot does not appear to be the only company with the opportunity to acquire Bitfarms, as well-capitalized mining companies such as Marathon Digital and CleanSpark may also be monitoring the situation.
Bitfarms also responded that they have indeed received interest from many companies in acquiring the company. The internal committee of the company is considering various options, including continuing business 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. Data from The Block shows that the daily average income of Bitcoin miners in the past month is about $35 million, a decrease of over 50% compared to the halving day.
The increasingly challenging industry environment and competition among peers following Bitcoin’s halving seem to necessitate further mergers and consolidations for mining companies to survive these bleak times. This potential Bitfarms acquisition case is a representative example of this trend.