On March 25, 2014, Daniel Loeb’s Third Point LLC filed suit against Sotheby’s and its directors in Delaware’s Court of Chancery to invalidate Sotheby’s poison pill. The board of Sotheby’s adopted the poison pill this past October two days after Mr. Loeb sent a letter stating that Third Point had increased its ownership of Sotheby’s to 9.3% and offering to join Sotheby’s board, among other things.
In its complaint, Third Point asks the court to decide on what is described as a novel question for Delaware courts – whether a board of directors can adopt a poison pill with a 10% ownership trigger directly in response to a stockholder who does not threaten a takeover of the company, but simply seeks minority representation on the board, where the poison pill has a 20% threshold for other investors. Third Point alleges that Sotheby’s poison pill improperly attempts to entrench the incumbent directors and impede a proxy contest by Third Point.
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Topics: Board of Directors, Minority Shareholders, Poison Pill, Professional Liability, Shareholder Litigation, Shareholders, Sothebys
Published In: Business Organization Updates, Civil Procedure Updates, General Business Updates, Finance & Banking Updates, Securities Updates
DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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