Decision in brief: Riot Platforms, Inc v Bitfarms Ltd, Application relating to a transaction, November 19, 2024

Riot Platforms, Inc. asked the Tribunal to put a stop to the shareholder rights plan that Bitfarms Ltd. recently put in place. Under the plan, if anyone came to own more than 15% of Bitfarms’s shares, then all the other shareholders would be able to purchase shares of Bitfarms at half price. When Bitfarms adopted the plan. Riot owned almost 15% of Bitfarms’s shares and was the largest shareholder of Bitfarms. Riot said the plan was not fair, mainly because securities laws about take-over bids use 20% (instead of 15%) as the level at which some of the take-over bid rules start to apply.

For the Tribunal to make the order that Riot wanted, the Tribunal had to decide that it was in “the public interest” to make that order. In this decision, the Tribunal discusses earlier cases that talked about what “the public interest” means. The Tribunal decided that in cases like this, where the applicant (in this case, Riot) says that a shareholder rights plan doesn’t actually break the rules, but the plan should be stopped anyway, the applicant has to show that the plan undermines, in a real and substantial way, and in a way that impacts the public, one or more of the “animating principles” (main policy reasons) that run through Ontario securities law. If the applicant can show that, and if the company with the plan (Bitfarms, in this case) can’t show exceptional circumstances that would support the plan being allowed to continue, the plan will be stopped.

The Tribunal decided it was in the public interest to stop Bitfarms’s shareholder rights plan. The plan undermines, in a real and substantial way, the animating principles that run through Ontario securities law about take-over bids. If the Tribunal let the plan continue, that would reduce how predictable and certain the rules around take-over bids are, and it would weaken confidence in the capital markets. There were no exceptional circumstances that would justify allowing the plan to continue.