425: Riot Platforms Criticizes Bitfarms' Adoption of 'Poison Pill' and Corporate Governance

Riot Platforms publicly criticizes Bitfarms' adoption of a shareholder rights plan (poison pill) with a 15% trigger, viewing it as a move to entrench the current board and disregard shareholder interests amid a potential business combination.

Summary

• Riot Platforms has publicly criticized Bitfarms for adopting a shareholder rights plan, also known as a 'poison pill'.
• The 'poison pill' prevents any shareholder from acquiring 15% or more of Bitfarms' common shares without a formal takeover bid.
• Riot believes this measure is shareholder-unfriendly and designed to entrench the current Bitfarms board.
• Riot had previously urged Bitfarms to consult with Riot and other large shareholders on new board members.
• Riot also called for the resignation of Bitfarms Chairman Nicolas Bonta due to corporate governance concerns.
• Riot cautions that its proposal for a business combination with Bitfarms is non-binding and there is no assurance that any definitive offer will be made or accepted.

Sentiment

Score: 3

Explanation: The sentiment is negative due to the conflict between Riot and Bitfarms, the criticism of Bitfarms' corporate governance, and the uncertainty surrounding the potential business combination.

Negatives

• Bitfarms adopted a shareholder rights plan (poison pill) that prevents shareholders from acquiring 15% or more of the company's shares without a formal takeover bid.
• Riot Platforms views this as a shareholder-unfriendly move and evidence of poor corporate governance.
• Riot's CEO, Jason Les, stated that Bitfarms responded to their concerns by implementing an 'off-market Poison Pill' with a trigger well below the customary 20% threshold.

Risks

• There is no assurance that Riot will make a definitive offer for Bitfarms.
• Bitfarms may not accept any offer made by Riot.
• The proposed business combination may not be approved or consummated.
• The combined company may be unable to achieve expected synergies and operating efficiencies.
• The integration of Bitfarms' operations with those of Riot may be more difficult, time-consuming, and costly than expected.

Future Outlook

The document discusses a potential, but non-binding, business combination between Riot Platforms and Bitfarms. The future is uncertain, with no guarantee of a definitive offer, acceptance, or successful completion of the transaction.

Management Comments

• Jason Les, Chief Executive Officer of Riot, stated: 'We have attempted to privately engage with the Bitfarms Board and recently sent two letters urging constructive collaboration with us around the addition of at least two new directors who are fully independent of Bitfarms and Riot.'
• Jason Les, Chief Executive Officer of Riot, stated: 'Instead of engaging with us privately and in good faith, Bitfarms has responded by implementing an off-market Poison Pill with a trigger well below the customary 20% threshold.'
• Jason Les, Chief Executive Officer of Riot, stated: 'This action further demonstrates the Bitfarms Boards entrenchment and disregard for the perspectives of its shareholders, who clearly signaled their discontent less than two weeks ago when they voted out Company co-founder Emiliano Grodzki.'
• Jason Les, Chief Executive Officer of Riot, stated: 'In our most recent letter, we urged the Bitfarms Board to facilitate the resignation and removal of Chairman and interim CEO Nicolas Bonta, who has led the Bitfarms Board since 2018 and bears direct responsibility for its poor corporate governance practices, as a first step to address shareholders concerns.'
• Jason Les, Chief Executive Officer of Riot, stated: 'We will continue to push to address the serious corporate governance issues at Bitfarms and ensure that shareholders have a say on the Companys path forward.'

Industry Context

This announcement highlights the ongoing consolidation efforts within the Bitcoin mining industry, with Riot Platforms attempting to acquire Bitfarms. The adoption of a 'poison pill' by Bitfarms is a defensive tactic often used to deter hostile takeovers, indicating a potential disagreement on valuation or control between the two companies.

Comparison to Industry Standards

• The 15% trigger in Bitfarms' poison pill is lower than the customary 20% threshold, as noted by Riot, and is in direct conflict with established legal and governance standards, including those published by leading proxy advisory firms Institutional Shareholder Services Inc. and Glass, Lewis & Co.
• Poison pills are common in corporate governance, but the specific terms, such as the trigger threshold, can be contentious and subject to shareholder scrutiny.
• Other companies in the Bitcoin mining space, such as Marathon Digital Holdings and CleanSpark, do not currently have similar poison pill provisions in place, making Bitfarms' action somewhat unusual.

Stakeholder Impact

• Shareholders of Bitfarms may be impacted by the adoption of the 'poison pill', as it could limit their ability to sell their shares or participate in a takeover bid.
• Shareholders of Riot Platforms are cautioned that the proposal for a business combination with Bitfarms is non-binding and there is no assurance that any definitive offer will be made or accepted.

Next Steps

• Riot will continue to push to address the serious corporate governance issues at Bitfarms.
• Riot will ensure that shareholders have a say on the Company's path forward.
• Riot may file one or more registration statements, prospectuses, management information circulars, proxy statements, proxy circulars, tender offers, takeover bid circulars or other documents with the SEC and applicable Canadian securities regulatory authorities.

Key Dates