Avid Bioservices Inc (CDMO)

[ImaPseudonym]

Isn't the poison pill really just about dilution?

If it gets triggered, we end up with an additional $11 or $55 (depending on who is right) worth of common shares. This would dilute away the potential controlling interest of the hostile bid, by increasing the number of outstanding shares without altering the percentage of those shares held by any normal investor.

Suppose the stock is trading at $1 (it just makes the math easier) at the time the pill is triggered. An ordinary Joe shareholder, holding 1000 shares, now has the right to purchase 1000 x .001 preferred shares for $11 or $55, and upon doing so would then be given either $22 or $110 worth of common stock for each .001 share of preferred. If everyone exercised immediately, there would be 22 or 110 times as many shares outstanding as there were prior to the pill being triggered. For a split second, Joe's shares would be worth either $22,000 or $110,000 but as soon as the stock starts trading again, the share price will presumably drop.

The attempted takeover has temporarily failed, because their controlling interest got diluted away, but nobody is making any money here so I really don't see why it matters if the exercise price is $55 or $11.

Maybe I am just misunderstanding the way this pill works, but I don't see any difference between a $55 or $11 exercise price.