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What Is a ‘Poison Pill’ Defense?

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On Friday, Twitter countered Elon Musk’s provide to purchase the corporate for greater than $43 billion with a company device often called a poison tablet, a defensive technique acquainted to boardrooms making an attempt to fend off takeovers however much less acquainted to on a regular basis buyers.

This protection mechanism was developed within the Nineteen Eighties as firm leaders, going through company raiders and hostile acquisitions, tried to defend their companies from being acquired by one other enterprise, particular person or group.

A poison tablet is a maneuver that usually makes an organization much less palatable to a possible acquirer by making it dearer for the acquirer to purchase shares of the goal firm above a sure threshold.

“The entire level of it’s to make the provide from the board extra engaging than the acquirer,” stated Carliss Chatman, an affiliate professor of regulation at Washington and Lee College.

The technique additionally provides an organization extra time to judge a suggestion and can provide the board leverage in making an attempt to power a direct negotiation with the potential acquirer.

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A poison tablet is formally often called a shareholder rights plan, and it might seem in an organization’s constitution or bylaws or exist as a contract amongst shareholders.

There are various kinds of poison capsules, however often, they permit sure shareholders to purchase further inventory at a reduced value, stated Ann Lipton, an affiliate professor of regulation at Tulane College.

The one shareholder blocked from making these discounted purchases is the one who triggers the poison tablet. It’s triggered when an individual, often the acquirer, hits a threshold for what number of shares they personal. In the event that they hit that threshold, the worth of their shares is all of the sudden diluted as different shareholders make discounted purchases.

Securities consultants say that buyers not often attempt to break by means of a poison tablet threshold, although there are exceptions.

The pizza chain Papa John’s adopted a poison tablet in July 2018 in a uncommon occasion of an organization making an attempt to dam its founder from taking up. The founder, John Schnatter, exited after a report that he had used a racial slur in a convention name, an announcement he subsequently stated in courtroom had been mischaracterized. He owned 30 p.c of its inventory on the time.

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The poison tablet would have allowed shareholders to purchase inventory at a reduction if Mr. Schnatter, his relations or buddies raised their stake within the firm to 31 p.c or if anybody else purchased 15 p.c of the inventory with out the board’s approval. The dispute ended with a settlement in March 2019.

In Twitter’s case, the tablet would flood the market with new shares if Mr. Musk, or another particular person or group working collectively, purchased 15 p.c or extra of Twitter’s shares. That may instantly dilute Mr. Musk’s stake and make it considerably tougher to purchase up a large portion of the corporate. Mr. Musk presently owns greater than 9 p.c of the corporate’s inventory.

Ms. Lipton stated an organization may very well be restricted by the ceiling in its constitution on what number of shares it’s allowed to problem. However even when it has hit that ceiling, she stated, an organization has different choices to make the acquisition unattractive.

And poison capsules may be evaded if the acquirer or the shareholders sue the corporate for violating its fiduciary duties. However, Ms. Lipton stated, courts have proven “unimaginable reluctance” to intrude.

“Boards have a terrific quantity of leeway to evaluate what’s in the most effective curiosity of shareholders, significantly if they’re made up of impartial administrators,” she stated. Boards typically implement poison capsules on a brief foundation in order that they’ll take into account their choices with extra time.

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Very, based on Professor Chatman. She stated that hostile takeovers are usually not as widespread as they have been within the Nineteen Eighties as a result of potential acquirers now assume that corporations have poison tablet provisions in place.

Netflix efficiently fended off the billionaire investor Carl Icahn in November 2012, utilizing a poison tablet that might have made it dearer for Mr. Icahn, or another particular person or group, to build up extra shares of Netflix in the event that they acquired 10 p.c of the corporate with out the approval of its board.

Virtually a 12 months later, in October 2013, Males’s Wearhouse survived an acquisition try by Jos. A. Financial institution Clothiers after it adopted a poison tablet. (Males’s Wearhouse then acquired Jos. A. Financial institution in March 2014, and the proprietor of each corporations filed for chapter in August 2020.)

In September 1985, within the wake of rumors that the buyer items firm Philip Morris was focusing on it, the McDonald’s Company stated it had adopted a poison tablet plan to stop “abusive takeover techniques.” (The corporate stated the plan was not adopted in response to any identified provide.) A number of years later, the Walt Disney Firm introduced it had adopted one, calling it “a sound and cheap technique of safeguarding the pursuits of all stockholders.”

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California lawmakers advance tax on Big Tech to help fund news industry

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California lawmakers advance tax on Big Tech to help fund news industry

The California state Senate on Thursday passed legislation aimed at helping the news industry by imposing a new tax on some of the biggest tech companies in the world.

Senate Bill 1327 would tax Amazon, Meta and Google for the data they collect from users and pump the money from this “data extraction mitigation fee” into news organizations by giving them a tax credit for employing full-time journalists.

“Just as we have funded a movie industry tax credit, with no state involvement in content, the same goes for this journalism tax credit,” Sen. Steve Glazer (D-Orinda) said as he presented the bill on the Senate floor, casting it as a measure to protect democracy and a free press.

Its passage comes the same week lawmakers advanced another bill that seeks to resuscitate the local news business, which has suffered from declining revenue as technology changes the way people consume news. Assembly Bill 886 would require digital platforms to pay news outlets a fee when they sell advertising alongside news content.

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Glazer said his bill is meant as a complement to the other measure, adding that he and its author, Assemblymember Buffy Wicks (D-Oakland), plan to work with the companies that could be affected by both bills “in balancing everyone’s interest.”

The legislation passed 27 to 7, with one Republican — Sen. Scott Wilk (R-Santa Clarita) — joining Democrats in support. As a tax increase, it required support from two-thirds of the Senate and now advances to the Assembly.

A Republican who opposed the bill said technology is changing many industries, not just journalism, and that some of the innovations have led to inspiring new ways to consume news, such as through podcasts or nonprofit news outlets.

“These are all new models, and very few people under the age of 50 … even pick up a paper newspaper,” said Sen. Roger Niello (R-Fair Oaks.) “So this is an evolution of the marketplace.”

Opponents of the bill include tech company trade associations Technet, Internet Coalition and Chamber of Progress; the California Chamber of Commerce; and numerous local chambers of commerce.

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Supporters include unions representing journalists, a coalition of online and nonprofit news outlets, and the publishers of several small newspapers.

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Column: How a surgeon general's warning and a Supreme Court ruling may place gun control on the front burner

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Column: How a surgeon general's warning and a Supreme Court ruling may place gun control on the front burner

For decades, gun control policy in the U.S. has been virtually untouchable — except through efforts to make America’s gun culture deadlier, raising the toll of innocent victims.

Two recent developments suggest that the ground may finally be shifting toward rationality.

One is an “advisory” from Surgeon General Vivek Murthy identifying firearm violence as a public health crisis — the boldest statement from a government official calling attention to the horrific consequences of the nation’s turn away from common sense gun control.

Originalism tells judges not to consider the practical consequences of their interpretations.

— Former Supreme Court Justice Stephen Breyer explains why America can’t pass workable gun laws

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Murthy’s report is in the finest tradition of public health policy, akin to the 1964 report by Surgeon General Luther Terry that placed the links between smoking and cancer, bronchitis and coronary disease into the public record.

As Murthy himself observes, that initiative placed the U.S. on a course of tobacco regulation that reduced the prevalence of smoking from 42% of adults in 1964 to 11.5% in 2022.

The other is a June 21 Supreme Court decision finding that laws barring domestic abusers from possessing guns are constitutional. The ruling is an indication — albeit slight — that a majority on the court has concluded that earlier decisions that found almost any state and local restrictions violated the 2nd Amendment were far too indulgent.

Let’s take the advisory and ruling in order.

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Murthy’s advisory is an extraordinary synopsis of the toll of America’s fascination with firearms and its failure to regulate gun ownership.

Firearms passed motor vehicles as the leading cause of death of children and adolescents in the U.S. in 2019.

(U.S. Surgeon General)

He reports that firearms are now the leading cause of death among children and adolescents, having passed motor vehicles in 2019. In 2022, guns killed more than 48,200 Americans through homicides, suicides and accidents, rising by about 16,000 over the previous 10 years.

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Murthy’s report notes that guns are used in 55% of all suicide attempts and that their lethality in those cases is unmatched — nearly 90% end in death, higher than any other method.

The report treats mass shootings (defined as those with four or more victims, not counting the shooter) soberly. These account for only about 1% of all firearm deaths, but their impact is far greater due to their “outsized collective trauma on society” and their “strong negative effect on the public’s perception of safety.” One in three adults “say fear prevents them from going to certain places or events.”

Murthy’s report puts the lie to the familiar claim by Republicans and gun rights fanatics that the problem, especially when it comes to mass shooting, is mental health, not firearms.

House Speaker Mike Johnson (R-La.), for instance, told Fox News anchor Sean Hannity in October, after a gunman killed 18 people in Lewiston, Maine: “Mental health, obviously, as in this case, is a big issue, and we have got to seriously address that as a society and as a government.”

Yet Murthy reports that “one’s mental health diagnosis or psychological profile alone is not a strong predictor of perpetrating violence of any type…. Importantly, most people with serious mental illness are not violent against others. In fact, people with serious mental illnesses are more likely to be victims of violence.”

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For all their nattering about the need to address mental health, anyway, Republicans have never lifted a finger to promote any programs to do so.

Now to the Supreme Court.

international comparison

The rate of firearm deaths of childen and adolescents in the U.S. vastly surpassed the rates in other developed countries.

(U.S. Surgeon General)

Rahimi v. United States, which yielded an 8-1 decision on June 21, is the first gun-rights case to come before the court since a 2022 decision known as Bruen, in which Clarence Thomas, writing for a 6-3 majority, essentially found that all modern efforts to regulate firearms are unconstitutional.

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Thomas held, in effect, that the only legitimate basis for judging gun laws is historical — weighing the laws against the language of the 2nd Amendment to determine how the amendment was viewed by its drafters in 1789 and how their approach was dictated by the political and social context of that time.

In Bruen, Thomas ridiculed Justice Stephen Breyer’s dissent (with which justices Sonia Sotomayor and Elena Kagan concurred). Breyer had opened his argument with nine pages of statistics about gun ownership and its consequences for health and safety.

“It is hard to see what legitimate purpose can possibly be served” by Breyer’s figures, Thomas sneered. “Why, for example, does the dissent think it is relevant to recount the mass shootings that have occurred in recent years?”

In Rahimi, however, Chief Justice John G. Roberts Jr. asserted that the consequences of unrestricted gun ownership were highly relevant. To be fair, this was easy. The record made clear that Zackey Rahimi, the gun owner at the center of the case, was one vicious specimen indeed. As Roberts laid out in the opening three pages of his majority opinion, Rahimi had beat up his girlfriend (the mother of his child) and fired in her direction or at a bystander as she fled his grasp.

After she got a restraining order against him, he stalked her, threatened a different woman with a gun, was suspected by police of at least five other shootings, fired at motorists in at least two road-rage incidents and fired his gun indiscriminately at least two other times. Police searched his home and found a pistol and a rifle. He was charged under a Texas law that criminalized possessing a gun while under a retraining order due to domestic violence.

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Despite all that, the 5th Circuit Court of Appeals overturned Rahimi’s conviction, citing Bruen.

Roberts’ decision in Rahimi is a step toward ratcheting back the Bruen effect, in which almost every gun regulation is suspect. That brings us to the “originalism” principle, which undergirds the court conservatives’ distaste for restrictions on gun rights. As expressed by Thomas in his Bruen opinion, originalism holds that interpreting the constitution must depend on the “public understanding of a legal text in the period after its enactment or ratification.”

As the now-retired Breyer put it in a recent essay, “the originalist, instead of looking to the text and asking what the words mean now, may well ask what they would have meant to an ordinary eighteenth-century person” and applies them to the world of today. (Breyer isn’t a fan of originalism.)

Scholars such as Stanford historian Jack Rakove argue that interpretations of the 2nd Amendment depend more on originalism than any other provisions of the Constitution. Its impact emerged most notably in the Supreme Court’s so-called Heller decision. In that 2008 decision written by Justice Antonin Scalia, a 5-4 majority overturned a Washington, D.C., ordinance largely barring citizens from possessing handguns for self-defense in their own home.

Heller overturned more than the D.C. law — it upended more than 200 years of scholarship about the meaning of the 2nd Amendment’s preamble, which links “the right of the people to keep and bear arms” to the establishment of “a well regulated Militia.”

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As Breyer pointed out, historians and linguists had argued (in a friend-of-the-court brief in the Bruen case) that the phrase “bear arms” overwhelmingly referred to “war, soldiering, or other forms of armed action by a group” — not to an individual right. Heller, however, established an individual right to gun ownership for the first time.

Bruen expanded that right to gun ownership outside the home. The ruling deemed unconstitutional a New York law requiring citizens to have a license to carry firearms in public. America’s rising tide of gun violence can fairly be traced to Heller.

Scholars have pointed to numerous problems with originalism. One is that judges are (usually) not historians. They may be utterly at sea when trying to find the apposite historical application to contemporary conditions.

The drafters of the 2nd Amendment, as it happens, were concerned about the public threat of a government’s standing army; historians argue that the amendment was designed to prevent the federal government from interfering with the creation of state militias.

Firearms in the 18th century were “not nearly as threatening or lethal as those available today,” Rakove writes; people in that era were concerned not with threats from “casual strangers, embittered family members, violent youth gangs, freeway snipers, and careless weapons keepers.”

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In other words, applying an 18th century mind-set to 21st century conditions is a fool’s errand. “Originalism” only interferes with judges’ responsibility to ponder the real-world impacts of their decision — their option, Rakove says, is to “ransack” the historical record for quotations that can support their preexisting goals.

“Originalism,” says Breyer, “tells judges not to consider the practical consequences of their interpretations.” Its product is the paralysis of federal, state, and local efforts to regulate gun ownership. It’s also responsible for the contraction of individual rights being rolled back almost gleefully by the current Supreme Court majority, notably abortion and other women’s reproductive healthcare rights, as originalists argue that the concept of privacy on which those other rights are based can’t be found in the Constitution.

It’s also proper to note that the public during the time the 2nd Amendment was drafted, enacted and ratified is very different from the public affected by its consequences today. In 1791, among other distinctions, enslaved people were not considered citizens and women could not vote. Who set the terms back then under which today’s Americans must live?

Rahimi won’t solve the mess in gun regulation created by the Heller and Bruen rulings. A multitude of pending cases might strengthen it or undermine it. But at least it’s a step back from the abyss.

Murthy’s advisory gives a similar impression of being a first step on a path that might lead nowhere. He calls for more research on violence prevention strategies and laws preventing children’s access to guns, universal background checks, banning assault weapons and restricting the carrying of loaded firearms in public.

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The bottom line, of course, is that America’s gun violence crisis can only be solved by fewer guns. There’s a long road ahead to reaching that goal.

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Supreme Court upsets $10-billion opioid settlement because it shields the Sacklers

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Supreme Court upsets $10-billion opioid settlement because it shields the Sacklers

The Supreme Court on Thursday rejected a mass settlement related to the nation’s opioid crisis that would have paid an estimated $10 billion to victims, hospitals, states and others, and shielded the Sackler family from further liability.

By a 5-4 vote, the justices ruled that a bankruptcy judge does not have broad power to arrange a mass settlement of thousands of claims that includes protections for people who are not bankrupt.

The justices were split in an unusual way. Justice Neil M. Gorsuch spoke for the majority, while Chief Justice John G. Roberts Jr. and Justices Sonia Sotomayor, Elena Kagan and Brett M. Kavanaugh dissented.

“We hold only that the bankruptcy code does not authorize a release and injunction that, as part of a plan of reorganization under Chapter 11, effectively seeks to discharge claims against a nondebtor without the consent of affected claimants,” Gorsuch said.

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“Today’s decision is wrong on the law and devastating for more than 100,000 opioid victims and their families,” Kavanaugh said in dissent. “The court’s decision rewrites the text of the U.S. Bankruptcy Code and restricts the long-established authority of bankruptcy courts to fashion fair and equitable relief for mass-tort victims.”

The Sacklers, owners of the Purdue Pharma company, had denied wrongdoing but agreed to contribute $6 billion to the settlement fund if they would be protected from future lawsuits.

The case has been closely followed not just because of the opioid settlement but also because of the use of bankruptcy laws to settle other mass lawsuits involving the Boy Scouts of America and some Catholic dioceses.

Purdue Pharma filed for bankruptcy in 2019 facing thousands of lawsuits alleging its marketing of OxyContin as a nonaddictive pain relief pill had triggered an opioid epidemic that led to more than a half-million deaths since the mid-1990s. In the decade prior to the bankruptcy, the company had distributed about $11 billion to members of the Sackler family and their offshore accounts.

Their lawyers maintained that more than half of this amount was paid in taxes.

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But the scale of the damage and the liability for OxyContin was extraordinary. A bankruptcy court later put a hold on new lawsuits, while the pending claims against Purdue Pharma and the Sacklers were estimated to seek in total more than $40 trillion.

A coalition of creditors, including victims, hospitals, local and state governments and tribal nations, negotiated a settlement that was that expected to pay out about $10 billion. Most of the funding — about $6 billion — came from the Sacklers.

In 2021, a bankruptcy judge approved the settlement and described it as the “only reasonably conceivable” way to fairly resolve the mass of lawsuits. Without the money from the Sacklers, he said the company would be liquidated, leaving most of the creditors with nothing.

While more than 95% of the creditors said they approved the deal, including all 50 states, the Biden administration’s bankruptcy trustee opposed it. He did so because the settlement shielded the Sacklers from any further or future liability.

In Harrington vs. Purdue Pharma, the trustee argued that the Sacklers were not bankrupt and therefore, cannot take advantage of the shield provided by a bankruptcy settlement.

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Last year, the Supreme Court put the settlement on hold to consider that argument.

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