Bitcoin miner Bitfarms has set October 29, 2024 for a special meeting where its shareholders will vote on reconstituting its board of directors. This decision was made after the meeting requested by Riot Platforms on June 24.

Bitfarms stated that shareholders of record as of September 26, 2024 have the right to vote at the meeting, but they are not required to take any action at this time. A special committee of independent board members reviewed the request with the assistance of financial and legal advisors and unanimously set the meeting and registration date.

As reported last month, Bitfarms shareholders will vote at a special meeting on the dismissal of chairman and interim CEO Nicolas Bonta and board member Andrés Finkielsztain. Bitfarms appointed Ben Gagnon as its new CEO on July 8, but Gagnon is not currently on the board, so he has not been targeted. They will also vote on the removal of Fanny Philip, who filled the vacancy after co-founder Emiliano Grodzki was removed from the board at the shareholders’ annual meeting.

Riot’s three proposed candidates for the board are: John Delaney, a government and public affairs expert with experience in the public and private sectors; Amy Freedman, a corporate governance and capital markets expert with more than 25 years of experience; and Ralph Goehring, a finance and energy expert with extensive public company CFO experience.

In its statement, Bitfarms argued that Riot could bring these issues to the agenda at the company’s annual general meeting on May 31 and did not propose a new corporate strategy for the company. Riot has requested that the registration date be set after a hearing before the Ontario Securities Commission on July 22-23 and is seeking to invalidate the company’s shareholder rights plan.

In June, Bitfarms adopted a “poison pill” approach to prevent a potential acquisition. By September 10, if an entity accumulates more than 15% of Bitfarms’ stake, the company will issue new shares and dilute that entity’s stake. However, after September 10, this threshold increases to 20%.

Riot Platforms attempted to acquire Bitfarms for approximately $950 million in April. Last month, Riot said it was ready to talk with a reconstituted Bitfarms board about a possible acquisition, but withdrew its offer to buy the company for $2.30 per share due to the current board’s lack of meaningful involvement.

Since that deal was blocked, Riot has been steadily buying shares to become the largest shareholder in Bitfarms. As of now, Riot owns approximately 60 million shares, or 14.9%, of Bitfarms.

Riot Platforms’ market cap is $2.7 billion, while Bitfarms’ market cap is around $1 billion.

Bitfarms said in a statement on Friday that it is committed to communicating constructively with its shareholders and hopes that Riot will seek to communicate constructively with the company so that Bitfarms does not have to expend its limited cash resources to protect the interests of its shareholders against Riot’s actions.

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Bitfarms promised earlier this week to dilute its shares if an investor tries to buy more than 15% of the company’s shares. Bitcoin miner Riot Platforms is cracking down on rival Bitfarms’ plans to thwart a possible takeover.

Bitfarms adopted a “poison pill” policy earlier this week, effectively preventing any shareholder from acquiring 15% or more of its shares. The move comes after Riot Platforms announced last week that it plans to increase its 12% stake in Bitfarms; this would enable a hostile takeover of the rival company’s business. On Wednesday, Riot announced that it had purchased nearly 6 million Bitfarms shares on the open market over the past week, increasing its stake to 13.1%. Riot Platforms CEO Jason Les criticized Bitfarms’ defensive strategy on Wednesday.

“Instead of contacting us specifically and in good faith, Bitfarms implemented an off-market Poison Pill with a trigger well below the customary 20% threshold,” Les said in a statement.

Riot attempted to purchase all shares of Bitfarms last month for a total equity value of approximately $950 million. However, Bitfarms rejected this offer. Owning a large enough stake in a company gives an investor certain privileges, such as electing board members and appointing or removing c-level management members. Therefore, it is not uncommon for an investor to deliberately purchase shares to try to direct the company’s operations.

However, a “poison pill” or shareholder rights plan can prevent hostile takeovers. Under such a plan, a firm issues additional shares of stock to dilute an investor’s stake in its business.

The power struggle between Riot and Bitfarms comes at a time of turmoil at Bitfarms. In May, Bitfarms CEO Geoffrey Morphy was ousted over a dispute over the company’s management.

This internal turmoil has fueled Riot’s effort to seize control of its rival, according to the CEO. “We will continue to address serious corporate governance issues at Bitfarms and ensure shareholders have a say in the future of the company,” Les said. Bitfarms stock (symbol BITF) was trading at $2.45, up 7.8% at press time.

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Lawsuit Ends With Riot and Texas Blockchain Council’s Possible Win

In a lawsuit against entities including the U.S. Department of Energy, Energy Information Administration (EIA), and the Office of Management and Budget (OMB), the Texas Blockchain Council (TBC) and Riot Platforms alleged invasive data collection practices targeting cryptocurrency miners, as reported on Feb. 22.

In a filing dated Feb. 23 in the U.S. District Court for the Western District of Texas, the judge was convinced by the arguments presented by TBC and Riot, highlighting the potential irreparable harm without a temporary restraining order (TRO) against further data collection.

The court has consequently enforced a TRO, preventing the EIA from mandating crypto miners to respond to the survey and from sharing any data already collected. The court justified its decision, stating, “Plaintiffs have shown through a verified complaint and supporting evidence that immediate and irreparable injury, loss, or damage will result if a TRO is not issued.”

TBC and Riot raised concerns about the significant costs of compliance, the threat of prosecution for non-compliance, and the disclosure of proprietary information requested. Disagreement also arose over the duration of the survey, with the court deeming the EIA’s estimation of 30 minutes as “extremely inaccurate” and acknowledging TBC and Riot’s claim of over 40 hours for compliance.

The court deemed TBC and Riot likely to succeed in the lawsuit, noting the misuse of authority by the EIA in approving the emergency survey. It concluded that the emergency provision of the Paperwork Reduction Act (PRA) fell short of justifying such action.

The TRO is set to expire before March 25, with its purpose over the four weeks being to “preserve the status quo.”

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