NOL Pill Reloaded: Selectica, Inc. v. Versata Enterprises, Inc.
Engage, Volume 11, Issue 2
August 31, 2010Robert T. Miller
The poison pill is the paradigm anti-takeover device. As everyone involved in corporate law knows, under the terms of a typical pill, if a hostile acquirer purchases more than a designated percentage (usually fifteen percent) of the target company’s stock without the board’s consent, then all the other shareholders of the target receive new shares of the target’s stock, thus massively diluting the acquirer’s stake in the target. The acquirer thus fails to obtain voting control of the target and loses a significant part of its investment as the dilution transfers wealth from it to the other target shareholders. Although the mechanics of a typical poison pill are much more complex than such a summary indicates, the general effect of the pill is well-known: potential acquirers facing a target protected by a pill do not trigger the pill...