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Derivatives and Poison Pills
May 21, 2008 Full PDF
Hedge funds and other investors that use derivatives to enhance their positions in a company will be interested to know that a recently adopted poison pill seeks to cover such derivative transactions in that pill's definition of beneficial ownership. Under such a definition, any significant derivative investment that surpasses the ownership threshold of a poison pill (typically between 10 - 20% of a company's outstanding stock) could trigger that pill. While we are not aware of a general trend by companies to adopt such broad pills, it is nevertheless more important than ever for investors who are considering building a stake (whether actual or derivative) in any company to review the company's poison pill before taking such action.