NEW YORK – Cue Health announced after the close of the market on Thursday that its board has approved the adoption of a short-term shareholder rights plan in response to a rapid accumulation of shares by a third party.
The one-year plan is effective immediately and will expire on Sept. 20, 2024. It is designed to reduce the likelihood that any entity can gain control of Cue through open market accumulation of stock without paying all other shareholders an appropriate control premium and on terms that wouldn't deliver sufficient value for all shareholders, Cue said in a statement. The plan is also intended to give the board enough time to "make informed judgments and take actions that it believes are in the best interest of all shareholders," Cue said.
Under the plan, the rights will become exercisable if an entity, person, or group acquires beneficial ownership of 10 percent or more of Cue's outstanding common stock in a transaction not approved by the board. It also includes an exemption allowing certain passive investors to acquire up to 20 percent of the company's outstanding common stock. If the rights become exercisable, each holder – excluding the entity triggering the plan – will be entitled to purchase shares of the firm's common stock at a significantly discounted price, Cue said.
According to documents filed with the US Securities and Exchange Commission, Cue's board has authorized a dividend distribution of one right for each outstanding share of common stock, which entitles holders to purchase from the company one one-thousandth of a share of Series A participating preferred stock at an exercise price of $8 per one-thousandth of a share of preferred stock.
The plan, according to Cue, may discourage a merger, tender, or exchange offer involving Cue that isn't approved by the board. However, the plan doesn't stop the board from considering an offer that "recognizes the full value of Cue," Cue said.
"Cue is committed to engaging in constructive dialogue with our shareholders, and we value their perspectives," Cue Chairman and CEO Ayub Khattak said in a statement. "We are also focused on ensuring that all shareholders receive fair and equal treatment and are able to realize the full long-term value of their investment, which is what a rights plan is designed to do. As we look ahead, we are focused on executing our strategic plan, and we are confident that Cue is poised for significant sustainable growth with numerous near-term milestones."
At the end of August, investment management firm Tarsadia Investments sent a letter to Cue Health urging the company to begin a strategic review and realign its costs. The letter emphasized the need for Cue to evaluate strategic alternatives and enhance its board by appointing independent stockholder representatives.
In a document filed on Monday with the US SEC, Tarsadia reported it has formed a group that owns approximately 14 percent of Cue Health's outstanding shares.
In early Friday trade on the Nasdaq, shares of Cue were up nearly 11 percent at $.49.