The Delaware Court of Chancery recently dismissed a challenge to Selectica's shareholder rights plan, i.e. its "poison pill."
The facts of this case take us back to November 11, 2008, when Versata Enterprises, Inc. and related parties filed a Schedule 13D disclosing a 5.1% ownership position in Selectica common stock. Selectica had a poison pill plan in place at that time, but it had (as is/was the custom) a 15% triggering threshold, so Versata had no reason to believe that this was an epochal moment.
Six days later, though, apparently because of concern that futher share accumulation would have an impact on its own net operating loss carry forwards (NOLs), Selectica amended its pison pill to reduce the triggering threshold to 4.99%. Holders who had more than that before the adoption of the new plan were exempted, providing they didn't thereafter acquire another half percent.
On November 19, Versata updated its 13D filing to disclose a 6.1% ownership interest. It is unclear whether Versata was aware of the reduction in the triggering threshold two days earlier. From there we got to this, the board pulled the trigger (swallowed the pill, whatever the pertinent metaphor might be) on January 2, 2009.
Key takeaways fgrom the Chancery Court decision upholding Selectica:
1. Loss of NOLs is a legally cognizable threat under Unocal Corp. v. Mesa Petroleum Co.
2. There is nothing de jure about a 15% threshold, it has been simply a custom.
3. A decision to lower the trigger in the face of a legally cognizable threat is not per se invalid under Delaware law.
Showing posts with label Versata. Show all posts
Showing posts with label Versata. Show all posts
Tuesday, March 9, 2010
Tuesday, February 10, 2009
Selectica Goes Nuclear?
When we checked in January, Selectica had "exercised the poison pill" as the expression goes. Logically, shouldn't one say that it has swallowed the poison pill, thereby carrying the metaphor forward?
Anyway, it had doubled the number of shares of common stock held by all of its shareholders except for the would-be acquirers, Versata and Trinity.
It had also decided that it would be the plaintiff in the inevitable litigation, rather than waiting to become the defendant. Selectica filed in Delaware Chancery Court looking for a declaratory judgment patting it on the back for this.
On January 16, Versata and Trilogy jointly filed their answer to the complaint.
As I read the answer, the lawyers involved seem to ave worked rather hard to come up with an intensified form of the "poison pill" metaphor for what Selectica has done. They came up with "nuclear pill" and "reloaded nuclear pill." Sounds rather awkward, but hey ... I'm sure they gave this literary endeavor their best shot.
Appended to the Answer is a Counterclaim, which is the course in such a battle.
Here's some emphatic language from the Counterclaim.
"The case of Selectica reflects a 'how-to' for directors seeking to breach and rebreach the fiduciary obligations owed to shareholders of a public company. Selectica has a long and undistinguished history. It began auspiciously in March 2000, however, when the company commenced an initial public offering at an offering price of $30.00 per share. On the first day of public trading, per share prices increased over 371% and closed at $141.23 per share. Since that promising beginning, the company has executed a poorly-managed business strategy and has experienced consistent losses. Indeed, the nearly nine-year public company record of Selectica is replete with unfulfilled and unrealized promises. From a trading high of $154.44 in March 2000, Selectica’s stock price has utterly disintegrated, reaching a record-low closing price of $.69 on January 5, 2009 (since that date, trading in Selectica stock has been halted)."
Part of the problem, the defendants continue, is that Selectica has spent "time and resources resolving patent infringement claims related to its use, licensing and sales of its sales configuration software. Between April 2004 and October 2007, Selectica was required to defend itself in two suits claiming infringement of patents held by Trilogy and Versata."
Whoa! I hadn't been aware that patent infringement was a part of this case at all. My bad.
Frankly it seems bizaare to me that party A, owning an equity interest in party B, should sue B for patent infringement and then complain in a shareholders' lawsuit that B violated its fiduciary duty by spending time and money to resist that lawsuit. It means what? that the defendant in a patent infringement lawsuit can have a fiduciary duty to allow a default judgment?
Anyway, it had doubled the number of shares of common stock held by all of its shareholders except for the would-be acquirers, Versata and Trinity.
It had also decided that it would be the plaintiff in the inevitable litigation, rather than waiting to become the defendant. Selectica filed in Delaware Chancery Court looking for a declaratory judgment patting it on the back for this.
On January 16, Versata and Trilogy jointly filed their answer to the complaint.
As I read the answer, the lawyers involved seem to ave worked rather hard to come up with an intensified form of the "poison pill" metaphor for what Selectica has done. They came up with "nuclear pill" and "reloaded nuclear pill." Sounds rather awkward, but hey ... I'm sure they gave this literary endeavor their best shot.
Appended to the Answer is a Counterclaim, which is the course in such a battle.
Here's some emphatic language from the Counterclaim.
"The case of Selectica reflects a 'how-to' for directors seeking to breach and rebreach the fiduciary obligations owed to shareholders of a public company. Selectica has a long and undistinguished history. It began auspiciously in March 2000, however, when the company commenced an initial public offering at an offering price of $30.00 per share. On the first day of public trading, per share prices increased over 371% and closed at $141.23 per share. Since that promising beginning, the company has executed a poorly-managed business strategy and has experienced consistent losses. Indeed, the nearly nine-year public company record of Selectica is replete with unfulfilled and unrealized promises. From a trading high of $154.44 in March 2000, Selectica’s stock price has utterly disintegrated, reaching a record-low closing price of $.69 on January 5, 2009 (since that date, trading in Selectica stock has been halted)."
Part of the problem, the defendants continue, is that Selectica has spent "time and resources resolving patent infringement claims related to its use, licensing and sales of its sales configuration software. Between April 2004 and October 2007, Selectica was required to defend itself in two suits claiming infringement of patents held by Trilogy and Versata."
Whoa! I hadn't been aware that patent infringement was a part of this case at all. My bad.
Frankly it seems bizaare to me that party A, owning an equity interest in party B, should sue B for patent infringement and then complain in a shareholders' lawsuit that B violated its fiduciary duty by spending time and money to resist that lawsuit. It means what? that the defendant in a patent infringement lawsuit can have a fiduciary duty to allow a default judgment?
Tuesday, January 27, 2009
Three brief items
1. Selectica
Last time we checked in on the Delaware courts, Selectica had doubled the number of shares of common stock held by all of its shareholders except those of its would-be acquirers, Versata and Trilogy. It had also filed a complaint in court looking for a declaratory judgment -- it wants the court to give a goodhousekeeping seal to its actions.
More recently, (January 16) the defendants, Versata and Trilogy, filed their answer, with a copy to the SEC. You can read it for yourself here, I expect I'll discuss it next week.
2. Berndt out at Telular
Telular, a wireless communications company, has settled a pending proxy contest with Simcoe Partners, which owns just over 5% of its stock.
Simcoe's founder, Jeffrey Jacobowitz, will take a seat on Telular's board of directors, and the chairman of that board, John Berndt, will not stand for re-election. A new chairman will be chosen at the first board meeting after the 2009 annual meeting, which will likely take place in March. The announcement is a buit vague about timing. It mentions a 2010 annual meeting in March of that year, and it mentions a 2009 anual meeting upcoming -- so I'm guessing March for the more proximate meeting as well.
3. Circuit City, the electronics chaim that filed for bankruptcy in November, now says it is in talks with two potential buyers in connection with re-organization.
Meanwhile, its stores are holding "liquidation sales" that look suspiciously like those of an operation not too keen on liquidating. Discounts are at 10%, no more. This would make sense if the new buyers actually want to inherit an ongoing enterprise.
Last time we checked in on the Delaware courts, Selectica had doubled the number of shares of common stock held by all of its shareholders except those of its would-be acquirers, Versata and Trilogy. It had also filed a complaint in court looking for a declaratory judgment -- it wants the court to give a goodhousekeeping seal to its actions.
More recently, (January 16) the defendants, Versata and Trilogy, filed their answer, with a copy to the SEC. You can read it for yourself here, I expect I'll discuss it next week.
2. Berndt out at Telular
Telular, a wireless communications company, has settled a pending proxy contest with Simcoe Partners, which owns just over 5% of its stock.
Simcoe's founder, Jeffrey Jacobowitz, will take a seat on Telular's board of directors, and the chairman of that board, John Berndt, will not stand for re-election. A new chairman will be chosen at the first board meeting after the 2009 annual meeting, which will likely take place in March. The announcement is a buit vague about timing. It mentions a 2010 annual meeting in March of that year, and it mentions a 2009 anual meeting upcoming -- so I'm guessing March for the more proximate meeting as well.
3. Circuit City, the electronics chaim that filed for bankruptcy in November, now says it is in talks with two potential buyers in connection with re-organization.
Meanwhile, its stores are holding "liquidation sales" that look suspiciously like those of an operation not too keen on liquidating. Discounts are at 10%, no more. This would make sense if the new buyers actually want to inherit an ongoing enterprise.
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