The Activist Investor Blog
The Activist Investor Blog
Two Important Poison Pill Developments
It looks like Dan Loeb, Lucian Bebchuck, and Robert Jackson heard our plea.
Earlier, we suggested that eliminating or at least fighting poison pills should become investors' top priority. This week and last, a lawsuit and an academic paper got things started.
First, earlier this week Dan Loeb's Third Point LLC sued portfolio company Sotheby's over its shareholder rights plan. The complaint begins:
The question presented here, never before decided by a Delaware Court, is whether a board of directors can adopt a poison pill with a 10% trigger directly in response to a stockholder who does not threaten a takeover of the company, but simply seeks minority representation on the board.
It's way too early in the process to know how this litigation will work out. Third Point has asked for an expedited trial, seeing as Sotheby's scheduled its annual meeting for May 6, so we may know relatively soon.
Second, law professors Lucian Bebchuk and Robert Jackson provide one roadmap for the case. Earlier this month they published "Toward a Constitutional Review of the Poison Pill", a draft journal article that argues that most poison pills, operating under state (Delaware, mostly) law, conflict with the Williams Act, which of course is a Federal law.
We're not attorneys, so we can't assess with great authority the likelihood of success of the lawsuit, or the validity of the arguments (or the criticisms and rebuttals) in the paper. But, with a well-funded and determined plaintiff in Third Point, and two of the most respected securities law scholars in Bebchuk and Jackson, activist investors start off well.
The complaint and article are worth reading, and the lawsuit is worth following.
Thursday, March 27, 2014