Richards Layton & Finger
 

Recent Developments in Rights Plans in Light of the COVID-19 Pandemic

April 29, 2020

The COVID-19 pandemic has caused significant worldwide disruptions of business operations and has negatively impacted stock prices globally. As a result, many corporations find themselves potentially vulnerable to abusive takeover tactics, such as inadequate or coercive takeover proposals and market accumulations by investors seeking to profit from depressed stock prices that may not accurately reflect a corporation’s intrinsic value. In addition, some corporations have found that, due to downward movement in their stock price, they are at an increased risk of ownership changes in their stock that would threaten or impair the value of their net operating losses. In order to address these threats, an increasing number of corporations have adopted stockholder rights plans, and many others are preparing rights plans to put on the shelf in case they need to be quickly deployed in the coming months.