June 27, 2022

Volume XII, Number 178

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June 27, 2022

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An Update on Poison Pills, NOL Poison Pills and the COVID-19 Pandemic

Since the release of our recent article “Poison Pills, NOL Poison Pills and the COVID-19 Pandemic” in mid-April, we continue to see a surge in the number of companies implementing poison pills (also referred to as shareholder rights plans), a type of defensive tactic used by a corporation’s board of directors against a hostile takeover bid. 

In addition to 21 poison pill actions adopted by U.S. corporations in March (including 16 traditional poison pills with terms of one year or less and five tax benefits preservation plans, commonly known as “NOL poison pills,” with terms of approximately three years), there were 46 poison pills adopted from April to July (including 35 traditional poison pills and 11 NOL poison pills).[1] Within the first seven months of 2020, there have been a total of 70 poison pills adopted, compared to only a total of 35 adopted in 2019 (12 of which were adopted during the period of March to July in 2019).[2]

The chart below compares the number of poison pills adopted in 2019 vs. 2020 during the period of March to July:

Among the 70 corporations which have adopted poison pills this year, 38 of them cited in their press releases that their boards of directors have taken note of the substantial increase in market volatility and uncertainty as a result of the global COVID-19 pandemic, as well as the pandemic’s negative impact on their stock price, which they believed did not reflect their companies’ inherent value or business performance.

The corporations that adopted poison pills in 2020 come from a variety of industries, including oil and gas (12 corporation), entertainment and media (8 corporations), pharmaceutical and medical (6 corporations), real estate (6 corporations), apparel retail (4 corporations), and aerospace and aircraft (4 corporations). 

We will continue to follow developments and trends in this area.


ENDNOTES

[1] According to information available at S&P Capital IQ, a research and analytics platform for market and financial data. 

[2] According to Deal Point Data, a merger & acquisition, securities and governance research firm.

Copyright © 2022 Robinson & Cole LLP. All rights reserved.National Law Review, Volume X, Number 230
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Eric Kogan Business Transaction Attorney Robinson+Cole
Partner

Eric Kogan is co-chair of the firm's Business Transactions Group and a member of its Managing Committee. He represents clients in a broad range of corporate, strategic, financial, and commercial transactions, and he provides business counseling for corporate clients as well as for entrepreneurs. In the 2019 Edition of CHAMBERS USA: America's Leading Lawyers for Business, Eric is described by clients as "a consummate professional" who "rolls up his sleeves and helps us achieve our objective." Over the past five years, he has led more than 30 transactions with an...

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Leslie Levinson Health Business Attorney
Partner

Leslie Levinson is co-chair of the firm's Transactional Health Law Group and a member of both the Health Law and Business Transaction Groups. He has represented private and public businesses throughout his more than 30-year career. Although Les maintains an active business law practice, he concentrates on the transactional, regulatory, and compliance representation of health care and life science clients, including home care and hospice companies, physician practices, hospitals, information technology and medical device companies, health care equipment providers, and health care investors...

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Anna Jinhua Wang Markets & Securities Attorney Robinson + Cole Law Firm
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Anna Jinhua Wang, a member of the firm’s Business Transactions Group, assists clients with capital markets and securities law, mergers and acquisitions, and general corporate matters. She is fluent in Mandarin and Cantonese.

Capital Markets and Securities

Anna has a decade of experience helping public and private companies in capital market and securities-related matters. She represents clients across a range of industries, from emerging to established companies, and she helps them identify and secure sources of capital. She advises clients on capital...

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