Canadian bitcoin mining firm Bitfarms has approved the adoption of a shareholder rights plan to prevent a potential hostile takeover bid by rival miner Riot Platforms.
Bitfarms said in a statement on Monday that after June 20, each common share of Bitfarms outstanding will be issued and attached with one right. This defense strategy, also known as a poison pill, is commonly used by companies to dilute shares in a bid to prevent or discourage hostile takeover attempts.
Bitfarms said such rights are exercisable if one acquiring entity accumulates over 15% of the company’s outstanding shares before Sept. 10. That threshold will be relaxed to 20% after Sept. 10 if a takeover bid meets certain criteria.
Bitfarms’ poison pill adoption comes just days after Riot revealed it became a beneficial owner of Bitfarms with 11.62% of its issued and outstanding shares through acquisition in the open market.
As previously reported, Riot initially made an offer in April to acquire 100% of Bitfarms’ outstanding common stocks for $2.3 per share. Bitfarms openly rejected the offer, saying it “significantly undervalued” the company and its growth prospect.
However, Riot made additional purchases over the past few weeks to own 47.83 million shares, representing 11.62% of Bitfarms, as of June 5.
Bitfarms said the adoption of the shareholder rights plan is now subject to the approval of the Toronto Stock Exchange. The company’s stock is down 5% during pre-market trading on Monday.