FORT MYERS — Chico’s FAS, one of the largest employers in Lee County, has adopted a short-term shareholder rights plan, commonly known as a poison pill.
A poison pill is a defensive strategy designed to avoid a hostile takeover when a company’s shares are down. The plan usually provides existing shareholders the right to purchase additional shares at a discount, which dilutes the value to an outside investor.
In Chico’s case, company shares have dropped more than 73% year-to-date, against the S&P 500 index drop of 21.8%, according to MarketWatch. Shares closed April 6 at $1.16, after trading at around $4 a share at the end of February.
The company is issuing one right per each common share as of the close of business April 13. The rights become exercisable if someone or an entity acquires 10% or more of the common stock, according to a statement from the Fort Myers-based company.
The shareholder rights plan, the company adds in the statement, isn’t a response to any specific takeover bid or other proposal to acquire control of the company.
“In adopting the rights plan, the board has taken note of the unprecedented impact of the global COVID-19 pandemic on equity market valuations, including the dislocation in the company's stock price,” the release states. “Given the current environment and trading levels as well as the importance of maintaining focus on the company's operations, safeguarding the welfare of employees and serving customers, the board believes adopting the Rights Plan is in the best interest of all Chico's FAS shareholders.
Chico's portfolio of brands includes Chico's, White House Black Market, Soma and TellTale, an online intimates brand. It has 1,341 stores in the U.S. and Canada and sold merchandise through 70 international franchise locations in Mexico. The company, with 4,800 employees, posted $2.04 billion in revenue in 2019.