We tracked NOL Poison Pill Plan activity during the first six months of 2017. A total of 18 companies had some form of NOL Poison Pill Activity. The term “activity” for this purpose, includes adopting a plan, modifying or extending an existing plan, or expiring/terminating a plan. NOL Poison Pill Plans, which are also known as Tax Benefit Preservation Plans or Section 382 Rights Plan are designed to protect a company’s tax attributes (net operating loss carryforwards) and this is usually done by imposing a 4.9% threshold on acquisitions of stock.
Although a wide range of industries were represented, from Basic Materials to Telecommunications, the Financial Services Industry led the way. Of the 18 companies that disclosed NOL Poison Pill Activity during the first six months of the year, 4 of them (22%) were in the Financial Services sector, followed by the Manufacturing and Energy sector – both of which tied for second place with 3 companies each.
Interestingly, when compared to last year’s data, the Financial sector led in another category — NOLs. Specifically, of the 34 companies that we tracked in 2016, the Financial sector disclosed the biggest NOL carryforwards – $18.2B, followed by the Basic Materials sector.
We will continue to track these companies and others, with a specific focus on their NOL Poison Pill Activity, NOL dollar amount, Market Cap, Industry/Sector, etc…
With 6 months remaining in the year, it will be interesting to see how the data looks at year end. Will the Financial Services sector still lead? Or will the Technology sector lead (as they did in 2016)? Will microcap companies still make up the majority of the NOL Poison Pill companies? Or will we see some new entrants in the midcap and/or large cap space? If so, what types of sectors/industries will dominate, if any?