Bitfarms rejected Riot Platforms' acquisition proposal, saying $950 million was an undervaluation. Bitfarms Website/Screenshot

KEY POINTS

  • Bitfarms said it believes the proposed acquisition amount was undervaluing the company
  • Riot said it is concerned about the recent legal issues between Bitfarms and its former CEO
  • Riot was recently shorted by Kerrisdale Capital, which said the miner is headed for a 'collapse'

Bitcoin mining firm Bitfarms has announced it will adopt a shareholder rights plan, also called a "poison pill," in a bid to prevent the potential hostile takeover as proposed by Bitcoin mining titan Riot Platforms.

Bitfarms said it thoroughly reviewed Riot's proposal to acquire all of the issues and outstanding common shares of Bitfarms and determined that "the proposal significantly undervalues the Company and its growth prospects," as per a press release Monday.

The miner revealed it invited Riot to participate in its Strategic Alternatives Review Process, but the crypto mining giant "declined to participate in the process and instead has continued to acquire common shares of the Company in the open market."

Bitfarms' Rights Plan states that if an entity accumulates more than 15% of the mining firm's stake after June 20 through Sept. 10, Bitfarms will issue fresh shares. The fresh share issuance will dilute the accumulating entity's stake. Such plans are used by corporate boards to block attempts at a hostile takeover.

The announcement came less than a week after Riot said it had acquired a 12% stake in Bitfarms. Riot, which is currently one of the world's largest Bitcoin miners, revealed late last month that it initially proposed to acquire Bitfarms privately for $950 million in April, but the miner "rejected it without engaging in substantive dialogue with Riot."

It also said that the recent legal scuffle between the miner and its recently terminated CEO raises concerns about whether some of the board of directors were committed to acting in the best interests of all stakeholders.

"This is why we intend to call a Special Meeting to give shareholders a chance to bring needed change to the Bitfarms Board and make repairing Bitfarms' broken corporate governance and maximizing value for all Bitfarms' shareholders and their top priorities," Riot CEO Jason Les said at the time.

Ex-Bitfarms CEO Geoffrey Morphy sued the company last month, citing a breach of contract, and demanded $27 million in damages. At the time, Morphy was continuing his role as President and CEO of the company while Bitfarms was searching for a replacement following his dismissal in March.

After Morphy filed the lawsuit in mid-May, Bitfarms said Morphy had been "terminated effective immediately," saying Morphy's claims were "without merit."

Meanwhile, Riot Platforms isn't without its own issues after short seller Kerrisdale Capital said in a scathing report that the crypto mining behemoth was "headed for a mine collapse."

Kerrisdale said it is short on Riot due to the evolving regulatory environment in Texas, where Riot conducts a huge chunk of its mining activities. It also criticized Riot shareholders for accepting "excessive management compensation and serial dilution."