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They aren't taking away anything, they would be diluting the 51% shareholder's shares. They're giving themselves the option to fend off a hostile take over by m

They aren't taking away anything, they would be diluting the 51% shareholder's shares. They're giving themselves the option to fend off a hostile take over by making the pool bigger so that no one can get to 51% ownership.

colonwqbang 4y ago
Sure, I accept that it's legal in the US. It just seems strange that there isn't some rule saying that the board has to treat shareholders more or less equally. Since the board is elected by the shareholder votes it seems weird that they can just redistribute voting power at will. 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?
- SilasX 4y ago
  >It just seems strange that there isn't some rule saying that the board has to treat shareholders more or less equally. 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. [1] https://news.ycombinator.com/item?id=31160874 https://news.ycombinator.com/item?id=31160874
  - tptacek 4y ago
    Poison pills have been settled law in the US for decades.
    - SilasX 4y ago
      Which must be why I didn’t object to that part, only to the (explanation of the legal) justification given. Could you give my comment a re-read and ensure you were replying to the right one?
    - SilasX 4y ago
      Seriously, what the heck? I joined in to echo disagreement about a justification given -- one which would (dubiously) imply that you can do whatever the heck you want with the company once you control 51% (like siphoning resources to another company you fully own). 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?
- jdasdf 4y ago
  They are treating them equally. Elon has just as much of a right to purchase those shares at the same price as any other shareholder.
  - throwawaythekey 4y ago
    The whole point of the poison pill is that the hostile shareholder is not treated equally. He would not have the opportunity to buy the discounted/newly created shares that would be triggered by him purchasing stock. In essence upon hitting the trigger he would be diluted differently to other stockholders.
    - jdasdf 4y ago
      Do you have a primary source for that? I don't mean news reports saying that, i mean actual legal documentation saying that's how it works? Because there's a lot of misinformation going around, and a lot of new outlets confusing cause and effect.
      - throwawaythekey 4y ago
        Took a bit of digging but I found the SEC filing [1] and the press release [2]. I'll quote from the press release because it is more easily understood. I condensed it a bit but the gist should be clear. > 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/0001418091/000119312522107462/d296740d8k.htm https://www.sec.gov/Archives/edgar/data/0001418091/000119312... [2] https://www.prnewswire.com/news-releases/twitter-adopts-limited-duration-shareholder-rights-plan-enabling-all-shareholders-to-realize-full-value-of-company-301526627.html https://www.prnewswire.com/news-releases/twitter-adopts-limi...
- nullc 4y ago
  At the time the poison pill is setup no shareholder has the threshold. If you buy more shares and cross the threshold you did so in full knowledge of the effect. 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.

colonwqbang 4y ago

Sure, I accept that it's legal in the US. It just seems strange that there isn't some rule saying that the board has to treat shareholders more or less equally. Since the board is elected by the shareholder votes it seems weird that they can just redistribute voting power at will. 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?

SilasX 4y ago
>It just seems strange that there isn't some rule saying that the board has to treat shareholders more or less equally. 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. [1] https://news.ycombinator.com/item?id=31160874 https://news.ycombinator.com/item?id=31160874
- tptacek 4y ago
  Poison pills have been settled law in the US for decades.
  - SilasX 4y ago
    Which must be why I didn’t object to that part, only to the (explanation of the legal) justification given. Could you give my comment a re-read and ensure you were replying to the right one?
  - SilasX 4y ago
    Seriously, what the heck? I joined in to echo disagreement about a justification given -- one which would (dubiously) imply that you can do whatever the heck you want with the company once you control 51% (like siphoning resources to another company you fully own). 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?
jdasdf 4y ago
They are treating them equally. Elon has just as much of a right to purchase those shares at the same price as any other shareholder.
- throwawaythekey 4y ago
  The whole point of the poison pill is that the hostile shareholder is not treated equally. He would not have the opportunity to buy the discounted/newly created shares that would be triggered by him purchasing stock. In essence upon hitting the trigger he would be diluted differently to other stockholders.
  - jdasdf 4y ago
    Do you have a primary source for that? I don't mean news reports saying that, i mean actual legal documentation saying that's how it works? Because there's a lot of misinformation going around, and a lot of new outlets confusing cause and effect.
    - throwawaythekey 4y ago
      Took a bit of digging but I found the SEC filing [1] and the press release [2]. I'll quote from the press release because it is more easily understood. I condensed it a bit but the gist should be clear. > 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/0001418091/000119312522107462/d296740d8k.htm https://www.sec.gov/Archives/edgar/data/0001418091/000119312... [2] https://www.prnewswire.com/news-releases/twitter-adopts-limited-duration-shareholder-rights-plan-enabling-all-shareholders-to-realize-full-value-of-company-301526627.html https://www.prnewswire.com/news-releases/twitter-adopts-limi...
nullc 4y ago
At the time the poison pill is setup no shareholder has the threshold. If you buy more shares and cross the threshold you did so in full knowledge of the effect. 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.