4 ms·

Is it illegal for 51% of shareholders to dilute away the stake of the remaining 49%? Serious question -- I don't know. AFAIK (IANAL), companies have few restri

Is it illegal for 51% of shareholders to dilute away the stake of the remaining 49%? Serious question -- I don't know. AFAIK (IANAL), companies have few restrictions on stock dilution as long as the dilution is in the best interest of the shareholders. You can make a legally defensible argument that one actor is bad and should be diluted, but it's probably hard to make a legally defensible argument for selectively diluting shares of idle shareholders.

ffggvv 5y ago
seems arbitrary whats considered a "bad actor". maybe i think climate activist shareholders in energy companies are hostile / bad actors. Can i selectively dilute them out?
- goodoldneon 5y ago
  Are they actively attempting a hostile takeover and the board thinks that they'll hurt the company? Then I think that'd be legal. Otherwise I don't see how you could make a legally defensible argument around diluting shareholders just because of their beliefs
  - ffggvv 5y ago
    https://www.cnn.com/2021/06/02/investing/exxon-shareholders-climate-activist/index.html https://www.cnn.com/2021/06/02/investing/exxon-shareholders-... in this case yes. wonder why they dont
    - orhmeh09 5y ago
      Why do you think they dont?
    - goodoldneon 5y ago
      They were elected to the board by shareholders. That's entirely different than a hostile takeover. You can't say "this is not in the interest of the shareholders" when the shareholders voted for it
      - ffggvv 5y ago
        then lets dilute the shareholders who voted for it as theyh are clearly idealogically driven and actively hostile to the company itself or its profitability
        goodoldneon 5y ago
        Yea... you're stretching this one
        ffggvv 5y ago
        i dont see why. isnt that why they are saying elon is bad? because hes driving for free speech? why is it okay if its one person, or a few people, but >n bad actors is fine?
- mrtesthah 4y ago
  >seems arbitrary whats considered a "bad actor". Well, I guess if you’re a moral relativist that might be the case. I mean, why not burn the rest of the planet down for temporary profits? Why not enslave children in the Congo? It benefits the shareholders after all. How about murder and torture for hire? These decisions just seem so arbitrary. *shrug*
jonny_eh 5y ago
The poison pill is done in advance. If you buy-in and trigger it, it's your own fault.
narrator 5y ago
Yes, this is a self-dealing transaction since it is detrimental to certain shareholders and not others without getting the adversely affected shareholder's consent. This is what Savrin sued Zuck over in the early Facebook days.
- tptacek 5y ago
  Be careful about trying to reason from first principles on stuff like this. Poison pill plans are bog-standard settled corporate law. The legal principle is that the board has the right (/duty) to judge the value of the company, and the courts, in most circumstances, don't second-guess it. The board can (and routinely does) decide that offers to acquire the company must be routed through the board. Plans like this are why Microsoft doesn't own Yahoo, and why Carl Icahn didn't buy Netflix.

ffggvv 5y ago

seems arbitrary whats considered a "bad actor". maybe i think climate activist shareholders in energy companies are hostile / bad actors. Can i selectively dilute them out?

goodoldneon 5y ago
Are they actively attempting a hostile takeover and the board thinks that they'll hurt the company? Then I think that'd be legal. Otherwise I don't see how you could make a legally defensible argument around diluting shareholders just because of their beliefs
- ffggvv 5y ago
  https://www.cnn.com/2021/06/02/investing/exxon-shareholders-climate-activist/index.html https://www.cnn.com/2021/06/02/investing/exxon-shareholders-... in this case yes. wonder why they dont
  - orhmeh09 5y ago
    Why do you think they dont?
  - goodoldneon 5y ago
    They were elected to the board by shareholders. That's entirely different than a hostile takeover. You can't say "this is not in the interest of the shareholders" when the shareholders voted for it
    - ffggvv 5y ago
      then lets dilute the shareholders who voted for it as theyh are clearly idealogically driven and actively hostile to the company itself or its profitability
      - goodoldneon 5y ago
        Yea... you're stretching this one
        ffggvv 5y ago
        i dont see why. isnt that why they are saying elon is bad? because hes driving for free speech? why is it okay if its one person, or a few people, but >n bad actors is fine?
mrtesthah 4y ago
>seems arbitrary whats considered a "bad actor". Well, I guess if you’re a moral relativist that might be the case. I mean, why not burn the rest of the planet down for temporary profits? Why not enslave children in the Congo? It benefits the shareholders after all. How about murder and torture for hire? These decisions just seem so arbitrary. *shrug*

jonny_eh 5y ago

The poison pill is done in advance. If you buy-in and trigger it, it's your own fault.

narrator 5y ago

Yes, this is a self-dealing transaction since it is detrimental to certain shareholders and not others without getting the adversely affected shareholder's consent. This is what Savrin sued Zuck over in the early Facebook days.

tptacek 5y ago
Be careful about trying to reason from first principles on stuff like this. Poison pill plans are bog-standard settled corporate law. The legal principle is that the board has the right (/duty) to judge the value of the company, and the courts, in most circumstances, don't second-guess it. The board can (and routinely does) decide that offers to acquire the company must be routed through the board. Plans like this are why Microsoft doesn't own Yahoo, and why Carl Icahn didn't buy Netflix.