Stanley Adopts ‘Poison Pill’ to Shield Future Tax Credits

December 6, 2016  by Larry Thomas in Business Strategy, Industry   

The company said the plan, also known as a “poison pill,” was adopted to protect its net operating loss carryforwards, an accounting technique that will allow Stanley to offset future taxable income once the company becomes profitable again.

Under Internal Revenue Service guidelines, Stanley said it could lose the NOL’s, which are now worth an estimated $20.4 million, if a stockholder who owns at least 5% of the company’s shares substantially increases its stake.

According to documents filed with the Securities and Exchange Commission, two hedge funds, the Hale Partnership and Solas Capital Management, own 10% and 16.4% of Stanley’s shares, respectively. In recent months, the two groups have been pressuring the company to improve its financial results.

Under the shareholder rights plan, stockholders of record on Dec. 15 will receive the right to purchase one share of Stanley preferred stock for each share of common stock they own. The company said rights would become exercisable if a person or group that currently owns at least 4.9% of the company’s stock acquired an additional 1% of the shares. They also would be exercisable if a new investor acquires at least 4.9% of the shares.

If the rights become exercisable, all rights holders, except the person or group that triggered the exercise of the rights, would be allowed to purchase Stanley’s common stock at a 50% discount.

The exercise of the rights would immediately create more shares, thus making it more difficult for an investor or investment fund to gain controlling interest.