Corporate Governance

Selectica v. Versata Enterprises: A Poison Pill Triggered (The Unusual Nature of the 5% Trigger) (Part 4)

By J Robert Brown Jr.

In upholding the poison pill in Selectica, the court had to deal with an unusually low threshold for triggering the pill.  The board set the trigger at 5%.  How unusual is this?  The court described them as "fairly uncommon, although they have been employed with greater frequency in recent years."  In fact, according to expert testimony, at least 90% of pills had triggers of 15% or 20%.  Those with triggers below 5% were described as "quite rate."  See n. 138. 

For reasons that we will discuss, the number of low thresholds will likely increase significantly in the aftermath of this case. 

Full post as published by The Race to the Bottom on April 08, 2010 (boomark / email).