Safeguard Scientifics Inc. shareholder Sierra Capital Investments LP is criticizing Safeguard's adoption of a tax benefits preservation plan, saying it "effectively handcuffs" its largest investors from buying more shares and "negatively impacts trading liquidity."
Safeguard has said the plan aims to preserve its ability to use its loss carryforwards if an ownership change limits it. The plan is to be submitted for shareholder approval at the company's 2018 annual meeting.
Sierra Capital, which owns nearly 5.1% of Safeguard's outstanding shares, accused the company of having "brazenly adopted" a poison pill provision "under the guise of protecting the company's valuable tax assets," at a time when the tax assets appear to be at very little risk. The shareholder called on Safeguard's board to immediately reveal how vulnerable the company is to an ownership change so investors could determine if the provision is justified or if it is "simply a pretext to further entrench the board and management."
Sierra Capital further said it is "now even more convinced" that a change is needed at Safeguard and is preparing to nominate a slate of director candidates to the board. It also said it was still willing to engage in constructive dialogue with the board that could lead to an amicable resolution.
Sierra Capital has sought board and management changes at Safeguard, and earlier voiced its criticism for Safeguard's director nomination process.