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Activism in a Pandemic

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by John Grau | Published April 15, 2020

The 2020 proxy has differed from years past due to the spread of covid-19 and is changing the way that companies interact with their shareholders.

The dip in the market has caused some activists to swoop up shares at the greatly reduced price and make a bid for a takeover. This is causing some companies in the hardest hit industries, like energy and entertainment, to consider creating shareholder rights plans in the hopes of deterring these activists.

These plans differ from those in the past because companies are evaluating whether their corporate governance structures are strong enough to protect them in times like this. In an effort to protect shareholders from offers coming in that had goals that are not in the interest of the long-term goals for the company, some are turning back to poison pill provisions to prevent this from happening in the future. This includes lowering the ownership threshold trigger and closely monitoring activists and signs of a potential takeover.

Before every public company starts drafting a shareholder rights plan, companies need to decide if they are really in their best interest. Specifications can be made including moving the annual meeting, tying these provisions to the current pandemic, and changing threshold ownership triggers. This is normally a busy time in the proxy season, but many companies are looking to protect employees and current projects at this time rather than making drastic changes.

For further considerations, read into which companies have added poison pills in the last few weeks.

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