Tix Corp. has rejected a claim by a major shareholder that he has triggered a “poison pill” provision in shareholders rights plan, the company announced Monday.
Tix, a discount ticket seller based in Studio City, was notified on private and public forums by Haren Bhakta that his fund HSB Capital Partners LP, in Santa Ana, had exceeded the ownership limitations set in the company’s Shareholder Rights Plan and triggered a “poison pill” provision. The company passed the plan in 2014.
“If my estimates are correct, CEO Mitch Francis, you will dilute yourself out of control,” Bhakta said in one of his correspondences.
According to a news release, Tix said that Bhakta has no comprehension how a shareholder rights plan works and which shareholders risk having their ownership diluted.
“Under the Shareholder Rights Plan, every shareholder except the acquiring person and its ‘group’ has the right to purchase a significant number of new shares at a very low price,” Tix said in its statement. “As a result, all shareholders who exercise their rights will protect and increase their proportionate ownership of the company, while the acquiring person and his ‘group’ would have their ownership percentage effectively wiped out.”
The release stated that Bhakta had not triggered the “poison pill” and that Tix would monitor his activities.
A poison pill clause is designed to thwart hostile takeovers of a company. The tactic has relevance because last week Tix announced it is in discussions with MGM Resorts about a possible acquisition of the company. As a result, trading volume of the company’s shares spiked as investors accumulated shares.
“Tix urges all shareholders to dismiss any outreach from Mr. Bhakta. We will continue to take all actions to benefit the interests of all shareholders,” the company said in its statement.
Shares of Tix (TIXC) closed Monday down 1 cent, or more than 2 percent, to 40 cents on the over-the-counter market.