Bitfarms’ attempt to initiate a ‘poison pill’ strategy to prevent a possible takeover by Riot Platforms, Inc. has hit a roadblock. The defensive measure, known as a shareholder rights plan, was intended to prevent Riot from acquiring more than 10% of Bitfarms stock without board approval.
However, a cease and desist order of the Ontario Capital Markets Tribunal means that these efforts have now been nullified. According to Jason Les, CEO of Riot Platforms,
“This Tribunal ruling in favor of Riot’s application is a victory for all Bitfarms shareholders.”
The ‘halving effect’
The timing of this move is critical, especially as it follows Bitfarms reporting a gain of just 156 BTC in May – a significant drop of over 40% compared to April. While the same rose to 189 BTC in June, the overall drop in gains can be attributed to the “post-halving” economy following Bitcoin’s last halving.
Bitcoin halvings, which cut the rewards for mining new blocks by half, are having a profound impact on the mining industry. These events are intended to control Bitcoin’s supply and reduce inflation, but they also increase the costs of mining operations. The latest halving has made it more challenging for miners like Bitfarms to maintain profitability, especially as mining rewards decrease.
According to Juan Leon, Senior Crypto Research Analyst at Bitwise, a combined operation of Riot and Bitfarms could result in a significant increase in mining capacity. The merger could lead to
“52 EH/s of self-harvesting capacity by the end of 2024 at 15 locations worldwide.”
This potential synergy underlines the strategic importance of the acquisition for Riot, with the aim of strengthening its position in the competitive Bitcoin mining industry.
Is joining hands the best move?
The Bitcoin mining sector has been heavily affected by the economic adjustments following the halvings. Miners face increasing pressure to optimize their operations and cut costs to remain profitable. The reduction in mining rewards is forcing companies to innovate and scale up their operations to maintain their market positions. For Bitfarms, the drop in BTC revenue highlights the immediate effects of the halving and the need to quickly adapt to these changes.
Riot’s interest in Bitfarms suggests a strategic move to consolidate resources and improve operational efficiency. By combining their efforts, the two companies could leverage economies of scale and improve their overall competitive position in the market. However, Bitfarms’ defensive position indicates its determination to remain independent and protect the interests of its shareholders.
Bitfarms’ implementation of a “poison pill” strategy is an important step to thwart Riot Platforms’ takeover attempt. The decline in BTC revenues due to the post-halving economy and the potential benefits of a merger highlight the challenges and opportunities within the Bitcoin mining industry.
