Daktronics, Inc. (NASDAQ-DAKT) has announced an amendment to its existing shareholder rights agreement, extending the expiration date to November 19, 2025. The exercise price has been changed to $40.00, and the beneficial ownership threshold at which the rights become exercisable has been changed to 15% (or 20% for a passive, "13g investor").
As of November 8, 2024, the board has decided to convert an initial $7 million in face value of the $25 million senior second lien secured promissory note held by Alta Fox Capital Management, LLC into approximately 1.1 million shares of the company's common stock. With this conversion, Alta Fox would beneficially own around 6% of the company's outstanding shares.
In response to Alta Fox's demand for the repayment of the convertible note, the board rejected their proposal, as it was not deemed to be in the best interests of the company and its common shareholders. Consequently, the board notified Alta Fox of its intention to force the conversion of the convertible note to minimize dilution and costs to the company's shareholders.
In light of this situation, the board has extended the expiration date of the rights agreement, considering the risk that Alta Fox, due to its significant ownership position, may seek to take actions to advance its interests as a large debtholder, potentially influencing the composition of the board at the expense of common shareholders.
Under the rights agreement, the "rights" will become exercisable if a person or group acquires beneficial ownership of 15% (or 20% in the case of a "13g investor") or more of Daktronics' outstanding common stock without the prior approval of the board.
The board intends to submit the rights agreement to shareholders for ratification at the company's upcoming annual meeting of shareholders.
Daktronics is the leading U.S.-based designer and manufacturer of dynamic video communication displays and control systems for customers worldwide. The company operates in four domestic business units: live events, commercial, high school park and recreation, and transportation, as well as one international business unit. The market has reacted to these announcements by moving the company's shares -4.8% to a price of $14.45. For the full picture, make sure to review Daktronics's 8-K report.
