Using a classic strategy aimed at fending off unwanted takeover attempts, Riverbed Technology (NASDAQ:RVBD) has concocted a poison pill defense. The company announced that its board of directors unanimously approved a new stockholder rights plan. The initiative gives shareholders the right to acquire one one-thousandth of a share of new series A preferred stock at an exercise price of $75 per each share of common stock they own. Those rights kick in only if an investor gains a 10% stake in the company, or if an institution officially discloses a 20% position, without the approval of the board.
Although Riverbed did not specifically mention any investors in its press release, the poison pill is clearly a response to a disclosure by activist investor Elliott Associates last week that it had amassed a stake of roughly 9% in the company.
In releasing that disclosure, Elliott Associates described the technology firm's shares as "undervalued." The approximate 9% stake makes the investor Riverbed Technology's top shareholder.
Fool contributor Eric Volkman has no position in Riverbed Technology. The Motley Fool owns shares of Riverbed Technology. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.