Business Context and Reporting Period
Company: comScore, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: February 9, 2017 (Earliest event reported: February 8, 2017)
Context: The Company adopted a "Tax Asset Protection Rights Agreement" (Rights Plan) to preserve its ability to utilize Net Operating Loss (NOL) carryforwards and other tax attributes. The Board declared a dividend of one right per share of common stock to stockholders of record as of February 18, 2017.
Key Financial Metrics
This filing is a current report regarding a corporate governance action and does not contain financial performance data. The following metrics are not provided in this document:
- Revenue, profit, and cash flow
- Operating margins
- Debt levels and liquidity positions
Plan-Specific Financial Terms:
- Right Exercise Price: $120.00 per one one-hundredth of a share of Series A Junior Participating Preferred Stock.
- Redemption Price: $0.001 per Right.
- Trigger Threshold: Acquisition of 4.99% or more of outstanding Common Stock without Board approval.
Material Changes
The primary material change is the implementation of a poison pill defense mechanism designed to prevent an "ownership change" under Section 382 of the Internal Revenue Code, which would limit the Company's use of tax benefits. Key changes include:
- Adoption of a Rights Plan effective February 7, 2017.
- Creation of Series A Junior Participating Preferred Stock via a Certificate of Designation filed on February 8, 2017.
- Imposition of a penalty on any "Acquiring Person" (4.99%+ ownership) through the voiding of their rights and the potential "Flip-in" event for other shareholders.
Guidance, Outlook, and Risks
Management Commentary and Strategy: The Plan is intended to protect significant tax assets. The Board intends to seek stockholder approval of the agreement and related charter amendments at the 2017 annual meeting. An independent committee will review the Plan annually.
Risks and Contingencies:
- Ownership Change Risk: The Plan does not eliminate the risk of an ownership change that could limit tax benefits.
- Expiration: Rights expire on the earliest of: February 7, 2020; redemption; exchange; repeal of Section 382; the first day of a taxable year with no carryforwardable tax benefits; or the day following the 2017 annual meeting if stockholder ratification is not obtained.
- Redemption: The Board may redeem all rights for $0.001 per right at any time before the Distribution Date or the first public announcement of an Acquiring Person.
Investor Verification Checklist
- Verify the exact amount of Net Operating Loss (NOL) carryforwards and tax attributes the Company is seeking to protect.
- Confirm the date and outcome of the 2017 annual meeting of stockholders regarding the ratification of the Rights Plan.
- Monitor for any public announcements of an "Acquiring Person" crossing the 4.99% ownership threshold.
- Review the full text of the Tax Asset Protection Rights Agreement (Exhibit 4.1) for specific definitions of "Acquiring Person" and "Exempt Transactions."