Okay. This is my power alley, folks: takeover law and tactics.
Unlike a standard US pill, one that requires the full board approve any bid by a “non-desired” major holder (and thus may be attacked in the courts, if adopted during a hostile’s street sweep — as entrenchment), the standard Canadian pills are… more elegant, by far.
They are of a kind that may properly be adopted in the middle of a takeover fight, like this one. Why?
Because they simply say “street sweeps beyond 15% are per se coercive“, and thus… unlawful. [This pill gives current management breathing room to work on better deals, in secret — with more credible partners. Full pill document here, now at the SEC’s EDGAR window — at close of business, Monday.]
Specifically, Bitfarms’ pill now cannot be undone for six months (and then only if more than 50% of the shareholders vote it down), and ends all street sweeps, by requiring a formal Canadian tender offer, open to all — and kept open for at least 105 days, and the tender bidder must agree to buy at least 50%-plus-one share, at the price Riot would offer, in this case. Here’s that bit:
…Under the Rights Plan, a “Permitted Bid” is a take-over bid made in compliance with the Canadian take-over bid regime. Specifically, a Permitted Bid is a take-over bid that is made to all shareholders, that is open for 105 days (or such shorter period as is permitted under the Canadian take-over bid regime) and that contains certain conditions, including that no common shares will be taken up and paid for unless more than 50% of the common shares that are held by independent shareholders are tendered to the take-over bid….
And, Confidential Note to Jason Les — $2.30 won’t cut it — probably nothing shy of $5 will.
So — as I’ve said, Riot dumped perhaps $120 million into a dead money hole, to get 12% — and now must offer perhaps at least another $710 million, or $5/share, to win the other 38% it must get it hands on, in order to have complied with Bitfarms’ Canadian-style pill.
It cannot just bully small moms and pops (not above 15% of outstandings) in any more coercively cheap, fear-based “street sweeps”.
Riot can ask for a meeting to elect a slate of directors, but this gives the current board a minimum of six months, to work out its own white knight, or white squire, and / or come up with its own restructuring proposals — and offer those to all shareholders.
In sum, Messrs. Yi and Les… have been out smarted in a game of what used to be called (politically incorrectly)… “Mexican Sweat”.
Hilarious.
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