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Bitfarms‘ plans to thwart a potential takeover of its business are outside traditional business norms, the CEO of Riot Platforms said Wednesday.
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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