Third Point LLC, a hedge fund founded by noted activist investor Dan Loeb, has filed suit against the auction house Sotheby's in the Delaware Court of Chancery seeking to invalidate Sotheby's "poison pill." The pill prevents investors, such as Third Point, from acquiring more than 10% of a company's stock. Passive investors, however, may acquire up to 20% of the company without triggering the pill. Both the 10% ownership trigger and the fact that the pill applies to "activist" investors rather than passive investors are recent innovations that have yet to be directly addressed by Delaware Courts. Third Point argues that these features of Sotheby's pill are unreasonable and serve only to entrench the positions of the existing directors. Sotheby's contends that the pill is designed to give the board and stockholders sufficient time to consider proposals from investors such as Third Point.
At a hearing on March 31, 2014, Vice Chancellor Donald F. Parsons Jr. noted that Sotheby's pill is "relatively unusual" and that Third Point's claims are plausible. The Court has agreed to hear arguments on Third Point's request for a preliminary injunction on April 25, 2014.
Verified Compl. Third Point LLC v. Ruprecht, C.A. No. 9469-VCP (Del. Ch. Mar. 25, 2014).
Matt Chiappardi, Loeb's Third Point Gets Sotheby's Poison Pill Suit Fast-Tracked, Law360 (Mar. 31, 2014, 8:37 PM), http://www.law360.com/mergersacquisitions/articles/523289?nl_pk=2e07cdbd-0015-4040-9a2c-dff171f4c7ba&utm_source=newsletter&utm_medium=email&utm_campaign=mergersacquisitions
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