News of the plan triggered a surge of as much as 57% in the shares before the market opened yesterday -- mostly likely from short sellers covering their bearish trades -- but those gains faded by the end of the day. Jittery investors are incredibly pessimistic about the prospects for the company, whose market value now stands at about $87 million.
The difference between its market capitalization and certain bookkeeping assets would be valuable in a takeover, making the poison pill even more necessary.
As of the end of last year, Gannett had about $435 million in income tax net operating loss carryforwards and other tax assets that it can use to reduce its tax bill.
The poison pill would take effect if certain shareholders were to boost their ownership in the company by more than 50% in the next three years. The plan would dilute that ownership by offering other shareholders a chance to buy stock at a steep discount.
The coronavirus pandemic has taken a heavy toll on the company's share price -- which is down about 90% since the beginning of the year. Its next quarterly report will provide a clearer picture on how much the COVID-19 has negatively affected advertising revenue.
The crisis has made the company's cost-cutting plans much more immediate, accelerating a revenue decline that had been forecast to take several more years.
Gannett had been steadily profitable before the pandemic, and still has a chance to recover from these short-term travails.