Bitfarms Adopts New Shareholder Rights Plan Amid Court Ruling

According to GlobeNewswire, Bitfarms Ltd. (Nasdaq/TSX: BITF), a global Bitcoin data center company, has announced the adoption of a new shareholder rights plan following the decision by the Ontario Securities Commission’s Capital Markets Tribunal to halt transactions under the company’s existing shareholder rights plan.

Court decision

The court’s decision was issued following a hearing on July 22 and 23, 2024. The decision effectively terminates Bitfarms’ previous shareholder rights plan, which was initially introduced to preserve the integrity of the independent special committee’s strategic review process amid Riot Platforms, Inc.’s attempt to acquire the company.

New Shareholder Rights Plan

In response to these developments, the Bitfarms Board of Directors has unanimously approved a new shareholder rights plan. The plan, effective July 24, 2024, aims to ensure fair and equal treatment for all shareholders in connection with any unauthorized takeover bid or acquisition of control of the company. The new plan also provides protection against ‘creep bids’, where a company accumulates more than 20% of the company’s shares through an exempted takeover bid under Canadian takeover rules.

“The court has ruled to halt trading under Bitfarms’ Rights Plan, effectively terminating the plan. In response to this ruling, the Bitfarms Board of Directors has adopted a new Rights Plan to ensure that the interests of all shareholders are protected,” said Brian Howlett, Senior Director of the Bitfarms Board of Directors.

Provisions and Effects

The new rights plan provides that one right will be issued and attached to each common share outstanding as of August 6, 2024. This right will become exercisable if any person acquires or announces an intention to acquire more than 20% of the Company’s common shares without complying with the “permitted bid” provisions. A “permitted bid” is defined as a takeover bid that has been open for 105 days and meets certain conditions, including that the shares will not be acquired unless more than 50% of the shares held by independent shareholders are tendered.

The new plan must be approved by shareholders within six months. If approved, it will have an initial term of three years. The plan must also be approved by the Toronto Stock Exchange (TSX), which may delay consideration until it is satisfied that there will be no further intervention by the Securities and Exchange Commission.

Company Overview and Future Prospects

Founded in 2017, Bitfarms operates 12 data centers and has two more under development across four countries. The company is committed to using sustainable energy, primarily hydroelectric power. Despite the court’s decision, the board stressed that it remains committed to maximizing value for shareholders and achieving the best possible outcome for the company.

Bitfarms has retained Moelis & Company LLC as financial advisor, and Skadden, Arps, Slate, Meagher & Flom LLP, Peterson McVicar LLP, and McMillan LLP are providing legal advice. Innisfree M&A Incorporated and Laurel Hill Advisory Group are providing strategic advice and proxy solicitation assistance.

The new rights plan is seen as a measure to protect shareholder interests in potential takeover attempts and to ensure that any such bids are conducted fairly and transparently.

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