Court Upholds Poison Pill in Response to Activist Accumulations

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The Delaware Court of Chancery on May 2 rejected a request by Third Point to enjoin Sotheby’s annual stockholder meeting, scheduled for May 6, because of a “poison pill” stockholder rights plan adopted by Sotheby’s board. Third Point LLC v. Ruprecht, et al.

Sotheby’s plan provided a 20% ownership trigger for stockholders who disclaimed intent to control the company, but a 10% ownership trigger for other stockholders (including activist investors like Third Point). Third Point asked for a waiver that would give it a 20% limit, but the Sotheby’s board refused. Third Point then asked the court to postpone the stockholder meeting, claiming that the board had breached its fiduciary duties in adopting the plan and refusing the waiver. In this opinion the court denied Third Point’s request.

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