J.C. Penney Lowers Threshold for Poison Pill to 4.9 Percent

On Tuesday, J.C. Penney JCP lowered the threshold on its existing shareholder rights plan, or poison pill, and extended its expiration date. “The amendments to the Company's rights plan include extending the plan's expiration date from August 20, 2014 to January 26, 2017, and lowering the beneficial ownership threshold for a person or group to become an "acquiring person" under the plan from 10 percent to 4.9 percent,” said the company in a press release. The company argued that the purpose of the amendment is to protect its ability to use certain funds that can be used for tax benefits. The company said it has $2 billion in net operating loss carryforwards that could offset future profits and lower its tax obligations. Additionally, the company said that its move would “reduce the likelihood” of an ownership change. Investors that already hold more than a 4.9 percent ownership stake would only trigger the poison pill if they add to their existing position. Currently, State Street Global Advisers, Soros Fund Management and The Vanguard Group are the only investors with a stake above the new threshold. Investors will vote on the proposed amendment at the next annual shareholders meeting in May. If shareholders do not approve the amendments, it will not become effective.