2 Reasons Why Nuance Communications Ate a Poison Pill

Last week, Nuance Communications (NASDAQ: NUAN  ) adopted a "poison pill," aimed at diluting the voting powers of any shareholder who acquires more than 20% of the company's shares outstanding.

Although the company claims the measure wasn't directed at any individual shareholder or company, the move is certainly a little suspicious, considering activist investor Carl Icahn recently built his position in Nuance to more than 16% of shares outstanding.

In the following video, Fool contributor Steve Heller gives two possible reasons for why Nuance "activated" this poison pill provision. Whatever the reason may be, it's become clear that the company is on the defensive.

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Comments from our Foolish Readers

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  • Report this Comment On August 28, 2013, at 1:05 AM, lowmaple wrote:

    I can't imagine how this could ever be good for shareholders considering the compensation civen to the board.

  • Report this Comment On August 28, 2013, at 1:07 AM, lowmaple wrote:

    sorry given

  • Report this Comment On August 29, 2013, at 10:05 AM, dviz wrote:

    You *do* understand that the poison pill in this case is a *provision* and not executed; right? It is a threat. No one ate a poison pill here; Nuance only said "don't do this or I will". Still not a good sign, but you should get it right if you're going to write for the Fool.

  • Report this Comment On August 29, 2013, at 2:26 PM, TMFTopDown wrote:

    @dviz,

    Nuance *did* in fact swallow a poison pill by adopting a shareholder rights plan. It all depends if the conditions are met (a single investor owning more than 20% of common shares outstanding), whether the pill will be exercised.

    Thanks for your comment.

    Steve Heller

  • Report this Comment On September 05, 2013, at 11:08 AM, tweetybirdvicky wrote:

    Really well put. Thanks. I love the product and have been puzzled why they don't get their act together..... Hasn't there been a study that exec compensation is inverse to performance? Thanks for the video.

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