In a preemptive effort to guard its malnourished stock against any hostile takeover bids, online broker E-Trade Group Inc. adopted a stockholder rights plan Thursday designed to fend off slumping-stock predators.
Although the company's board of directors emphasized upon approval of the plan that it was not responding to any specific takeover threat, it said that it was seeking to protect and act in the best interest of E-Trade stockholders, as well as offer an adequate share price.
The online broker's stock (ET) has barely picked itself up after hitting a 52-week low of US$5.32 a share April 4, 2001. The company's shares were trading at $6.03 in mid-afternoon trading Friday, down 2.27 percent from their close of $6.17 Thursday.
But under the stockholder rights plan, commonly referred to as a "poison pill," the company will be issuing a new class of more expensive stock that will also have to be bought in the case of a takeover bid. If any one investor attempts to buy at least 10 percent of the company, the board is authorized to flood the market with the new preferred stock, making a hostile bid difficult and expensive.
Although the company has introduced the poison pill, it said that it is not discounting any "appropriate business combinations."