PetMeds® Adopts Limited Duration Shareholder Rights Plan

Rhea-AI Summary

PetMeds (NASDAQ: PETS) has announced the adoption of a duration shareholder rights plan to protect shareholders' interests. The plan, effective immediately until December 2, 2025, was implemented in response to recent significant stock accumulations and concerns that shares don't reflect the company's inherent value. Under the plan, shareholders will receive one right per common stock share as of December 16, 2024. These rights become exercisable if an entity acquires 12.5% or more of outstanding shares without Board approval, allowing other shareholders to purchase additional shares at a 50% discount to market price.

Positive

• Protection against hostile takeovers through implementation of shareholder rights
• Shareholders can purchase shares at 50% discount if rights become exercisable
• Board maintains flexibility to approve beneficial business combinations

Negative

• Company believes current stock price doesn't reflect business value
• Recent concerning accumulations of company stock by certain shareholders
• Defensive measure suggests potential vulnerability to hostile actions

Insights

Corporate Governance Expert

The adoption of a shareholder rights plan, commonly known as a "poison pill," signals significant defensive positioning by PetMeds. The 12.5% ownership threshold is notably low, indicating heightened concern about potential hostile takeover attempts. The plan's key features - including the 50% discount purchase right for existing shareholders and the one-year duration - are designed to deter aggressive accumulation of shares.

This defensive measure comes amid apparent undervaluation concerns and suggests management believes there's been significant unauthorized accumulation of shares. The timing and structure indicate the board is actively responding to specific threats rather than implementing routine governance measures. The December 16, 2024 record date provides immediate protection while maintaining flexibility for board-approved transactions.

Financial Analyst

This defensive measure could have mixed implications for shareholders. While it protects against low-ball takeover attempts, it may also limit near-term upside potential from acquisition premiums. With a market cap of just $91.2 million, PetMeds appears vulnerable to acquisition, especially given its established brand and customer base in the growing pet care market.

The rights plan's implementation suggests the board has identified specific accumulation patterns that could threaten shareholder value. The 50% discount mechanism creates a significant economic deterrent against unauthorized accumulation beyond the 12.5% threshold, effectively protecting current shareholders while potentially impacting trading liquidity.

DELRAY BEACH, Fla., Dec. 03, 2024 (GLOBE NEWSWIRE) -- PetMed Express, Inc. dba PetMeds and parent company of PetCareRx (NASDAQ: PETS) (“PetMeds” or the “Company”), today announced that its Board of Directors (the “Board”) has adopted a limited duration shareholder rights plan to protect the best interests of all PetMeds shareholders (the “Rights Plan”).

The Board adopted the Rights Plan to protect the investment of shareholders during a period in which it believes shares of the Company do not reflect the inherent value of the business or its long-term growth potential, and during which there have been recent significant accumulations of Company common stock by certain shareholders.

The Rights Plan is intended to enable PetMeds shareholders to realize the long-term value of their investment in the Company by reducing the likelihood that any entity, person, or group is able to gain a control or control-like position in the Company through open market accumulation without paying all shareholders an appropriate control premium or providing the Board sufficient opportunity to make informed judgments and take actions that are in the best interests of all shareholders. The rights plan does not prevent any action that the Board determines to be in the best interest of the Company and its shareholders.

The Rights Plan is not intended to interfere with any sale, merger, tender, exchange offer or other business combination approved by the Board. Nor does the Rights Plan prevent the Board from considering any offer that recognizes the full value of PetMeds and is in the best interests of PetMeds’ shareholders.

Pursuant to the Rights Plan, PetMeds will issue, by means of a dividend, one right for each outstanding share of PetMeds common stock to shareholders of record on the close of business on December 16, 2024. Initially, these rights will not be exercisable and will trade with, and be represented by, the shares of PetMeds common stock.

The Rights Plan is effective immediately and will expire on December 2, 2025, or earlier, as provided in the Rights Plan.

The Rights Plan is similar to other rights plans adopted by publicly-held companies. Under the Rights Plan, the rights generally become exercisable only if a person or group (each, an “acquiring person”) acquires beneficial ownership of 12.5% or more of the outstanding shares of PetMeds common stock in a transaction not approved by the Board. In that situation, each holder of a right (other than the acquiring person, whose rights will become void and will not be exercisable) will be entitled to acquire shares of PetMeds common stock at a 50% discount to the then-current market price. In the Rights Plan, the definition of “beneficial ownership” includes derivative securities. In addition, if PetMeds is acquired in a merger or other business combination after an unapproved party acquires beneficial ownership of 12.5% or more of the outstanding shares of PetMeds common stock, each holder of a right (other than the acquiring person, whose rights will become void and will not be exercisable) would then be entitled to purchase, shares of the acquiring company’s stock at a 50% discount to the then-current market price. The Board, at its option, may exchange each right (other than rights owned by the acquiring person that have become void) in whole or in part, at an exchange ratio of one share of PetMeds common stock per outstanding right, subject to adjustment. Except as provided in the Rights Plan, the Board is entitled to redeem the rights at $0.001 per right.

A person or group that beneficially owns 12.5% or more of the outstanding shares of PetMeds common stock prior to PetMeds’ first public announcement of its adoption of the Rights Plan will not trigger any penalties under the Rights Plan so long as, subject to certain exceptions described in the Rights Plan, it does not increases its ownership of PetMeds common stock at a time when it still beneficially owns 12.5% or more of PetMeds common stock.

Additional information regarding the Rights Plan will be contained in a Current Report on Form 8-K to be filed by PetMeds with the U.S. Securities and Exchange Commission.

About PetMed Express, Inc.

Founded in 1996, PetMeds is a leader in the consumer pet healthcare sector. As a national online retailer with expert pharmacists and licenses across fifty states, PetMeds.com and PetCareRx.com deliver top branded pharmaceuticals, generics, compounded prescription medications and OTC supplements and vitamins that help pets live longer, healthier lives. Leveraging telehealth and insurance partnerships, they offer unparalleled value and convenience that enhance wellness and longevity for dogs, cats, and horses. PetMeds and PetCareRx provides essential pet health offerings through their websites, www.PetMeds.com and www.PetCareRx.com.

Forward Looking Statement

This press release may contain “forward-looking statements”, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve a number of risks and uncertainties, including the Company’s ability to meet the objectives included in its business plan. Important factors that could cause results to differ materially from those indicated by such forward-looking statements are set forth in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections in the Company’s Annual Report on Form 10-K/A for the year ended March 31, 2023. The Company’s future results may also be impacted by other risk factors listed from time to time in the Company’s filings with the Securities and Exchange Commission, including, but not limited to, the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and periodic filings on Form 8-K. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this press release and should not be relied upon as representing the Company’s views as of any subsequent date. The Company explicitly disclaims any obligation to update any forward-looking statements, other than as may be required by law. If the Company does update one or more forward-looking statements, no inference should be made that the Company will make additional updates with respect to those or other forward-looking statements.

Investor Contact:
ICR, LLC
John Mills
(646) 277-1254

Reed Anderson
(646) 277-1260
investor@petmeds.com

FAQ

What is PetMeds' (PETS) new shareholder rights plan?

PetMeds has adopted a duration shareholder rights plan that gives shareholders one right per common stock share, allowing them to purchase shares at a 50% discount if any entity acquires 12.5% or more of outstanding shares without Board approval.

When does PetMeds' (PETS) shareholder rights plan expire?

The shareholder rights plan expires on December 2, 2025, unless terminated earlier as provided in the Rights Plan.

What triggers PetMeds' (PETS) shareholder rights plan?

The rights become exercisable if a person or group acquires beneficial ownership of 12.5% or more of PetMeds' outstanding shares without Board approval.

When will PetMeds (PETS) issue the rights dividend?

PetMeds will issue one right for each outstanding share to shareholders of record on December 16, 2024.