What if there was some minority shareholder that the other owners disliked for some reason, could they force them out too? Or this power is restricted to particular circumstances?
If the pill were activated and you were diluted out you could sue over the economic harm e.g. that they effectively stole half your position-- and you'd quite possible be reimbursed for the dilution. But you'd be more or less back where you started, minus the mountain paid to lawyers and still without ownership of the company.
Keep in mind, these poison pills aren't really intended to prevent acquisition. They're intended to prevent an inequitable acquisition via takeover where the existing shareholders might have to sue to get a fair treatment. E.g. elon getting enough control that he can pick the board (which takes less than 51% of the shares due to voting power effects)... then the elon controlled board agrees to sell the rest of the company for a less equitable price but not so outrageous that the other shareholders would have an easy time suing over it.
> What if there was some minority shareholder that the other owners disliked for some reason, could they force them out too? Or this power is restricted to particular circumstances?
Diluting out small share holders happens with some regularity in smaller companies. They could sue over it-- but it usually happens when there isn't a lot of value in the company itself and if they failed to push out an old shareholder the company wouldn't continue. So the party being diluted can only really choose between letting it happen or fighting it and getting their fair share of nothing minus legal expenses.
> In general terms, it works by imposing a significant penalty upon any person or group that acquires 15 percent or more of the shares of Common Stock without the approval of the Board.
> the rights will become exercisable if an entity, person or group acquires beneficial ownership of 15% or more... in a transaction not approved by the Board
> each right will entitle its holder (other than the person... triggering the Rights Plan, whose rights will become void...) to purchase.... additional shares of common stock
The SEC filing is a bit dense but then if you scroll down to a bit you get
> entitle the holder thereof to purchase, for the Exercise Price, a number of shares of common stock of the person engaging in the transaction having a then-current market value of twice the Exercise Price.
[1] https://www.sec.gov/Archives/edgar/data/0001418091/000119312... [2] https://www.prnewswire.com/news-releases/twitter-adopts-limi...
I'm not entirely clear whether this statement in the 8K is legal. Seems to me that it would run afoul of the boards responsibilities, especially given that it is unnecessary to achieve the result.
I find it hard to believe that would be the case, since it's needlessly discriminating against a single shareholder. The underlying game theory aspects mean that giving the hostile acquirer the warrants would be essentially irrelevant since they have no benefit in exercising them, while suffering the costs of doing so.
In short, there's no point in preventing elon from being able to purchase additional shares from the company below the acquisition offer because it would just be a waste of money for him.
AIUI, there is such a rule, and, FWIW, that’s why I found the OP’s explanation[1] somewhat dubious. Deliberately sabotaging the corporation for the benefit of another one that the 51%er owns … seems like the kind of thing that the courts would strike down.
I never disputed poison pills being legal, only one comment's justification for that conclusion.
It's not responsive to simply assert that poison pills are "settled law", since I wasn't ever disputing that, and no clear-headed, good-faith reading of my post would attribute such a remark to me.
And yet ... not only do some of you think the above reply is somehow responsive (or not a strawman), you seem to think I'm wrong to simply point out how it isn't.
Someone want to tell me what's going on? Is there some deep insight I can't seem to fathom from tptacek's non-repsonsive, dismissive reply that makes it all somehow worthwhile?