The Container Store Group adopted a poison pill provision after a shareholder amassed a stake in the Dallas-area company, pushing shares down more than 10%.
The Coppell-based retailer said Tuesday the company’s board adopted a limited duration stockholder rights plan, or what’s often called a poison pill. It’s effective immediately and will last until next October.
The move is in response “to the rapid and significant accumulation” of the stock by a single stockholder — and to protect value for all of its shareholders, according to the statement.
On Monday, a filing showed Amit Agarwal of Tampa, Fla., owned 621,400 shares — or about 18% of shares. That’s about $5.5 million in value. That’s up from last month when the stockholder had 442,500 shares, or nearly 13%. An attempt to reach Amit Agarwal by phone was not successful and the voice mailbox was full.
Shares of the Container Store were down roughly 13% at about 10:30 a.m. Dallas time on Tuesday. The Container Store — a retailer that helps customers get organized with stackable storage boxes, sturdy shelves and other options — has run into challenges driving growth and wooing customers.
Last month, the company did a 15-for-1 stock split after it received a noncompliance notification from the New York Stock Exchange as its stock didn’t keep its price above $1 over roughly a month.
Sales have declined for two straight fiscal years while it ran net losses and in May, the company announced it had initiated a review process to evaluate strategic alternatives, which generally includes the possible sale of the company.
The new stockholders rights plan is designed to help guard “against any stockholder obtaining undue influence over the company through open market accumulations and provide all stockholders an opportunity to maximize the value of their investment in the company,” the statement said.
Under the rights plan, one preferred stock purchase right will be distributed for each share held by stockholders on Oct. 23. The rights will become exercisable if a person or group acquires 20% or more of the company’s common stock — the triggering event. Then, each right will entitle its holder to buy (at the then-current exercise price) shares at a 50% discount — but not the shareholder that triggers the action.
