The company Bitfarms would be ready to resort to a Shareholder Rights Plan to discourage the acquisition by Riot Platforms.
On June 10th, following the shareholders’ meeting, the mining company Bitfarms announced the implementation of a plan aimed at protecting shareholder rights to hinder the attempted takeover by Riot Platforms.
A Shareholder Rights Plan in a publicly traded company is a defense mechanism adopted by the board of directors to discourage hostile takeovers. The plan grants shareholders the right to purchase additional shares at discounted prices if an outside investor acquires a stake above a certain threshold (typically between 10-20%), thereby diluting the stake of the hostile acquirer. The purpose is to make the acquisition more costly and difficult for the acquirer, giving the board more time to seek alternatives or negotiate better terms for shareholders.
Specifically, Bitfarms’ plan stipulates that if an investor becomes the owner of 15% of Bitfarms’ shares by September 10th and subsequently increases their stake to 20% without board approval, the other shareholders have the right to purchase shares at a price significantly below the market price at that time. This mechanism would dilute the potential acquirer’s stake, making the acquisition more difficult.
Previously, Riot stated that Bitfarms’ board rejected the acquisition proposal presented in April without any possibility for dialogue. Bitfarms, on the other hand, claimed to have evaluated Riot’s interest but deemed the offer to undervalue the company.
Subsequently, Riot decided to increase its stake in Bitfarms, going from holding 9.25% to 11.62% through a new purchase of approximately 1.5 million shares at a price of $2.45 per share.
