- Well-prepared public companies—particularly those with now lower market valuations due to the COVID-19 pandemic and the recent oil price collapse—should consider doing the preparatory work for an “on the shelf” shareholder rights plan (“poison pill”)
- Hostile raiders and shareholder activists may seek to take advantage of stock price declines and related vulnerabilities as they did during the 2008-2009 period
- Public companies of all sizes may be at risk, but particularly those with significantly depressed stock prices (both absolute and relative to peers), those exposed to oil price declines, and those with desirable intellectual property
- Companies should consider taking the following near-term steps:
- Do the homework to place a poison pill “on the shelf” if they have not already
- Refresh directors on their current “on the shelf” pill terms, fiduciary duties, etc.
- Analyze and update other takeover defenses and response plans before a hostile suitor or activist appears
- In appropriate circumstances, adopt short-term poison pills to protect against temporary vulnerability due to exceptionally lower market valuation
- Based on events in 2008-2009, we expect to see the increased rate of pill adoption in 2020 continue, particularly in the second half of the year
To read the full guidance piece, click here.
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