Yet Another Tax Benefits Preservation Plan

PMI Group, a company that provides various credit products for the residential home mortgage market, recently announced that its Board adopted a "Tax Benefits Preservation Plan". PMI joins the growing list of companies that have recently adopted similar plans, the purpose of which is to, preserve tax losses that may otherwise be substantially limited if a company triggers Section 382.

For more details about PMI's plan, click here

The "Sticky" Side of a Section 382 Rights Plan

A company's adoption of a Section 382 Rights Plan can be a bit more complicated than it appears. In theory, a Rights Plan is nothing more than a means to an end -- a measure to reduce the likelihood that a company's use of certain tax attributes will be limited under Section 382. Thus, the Rights Plan will impose limits on trading activity, effectively prohibiting certain shareholders from increasing their ownership stake.

But what if you're one of those shareholders? What might you think of this?

Interestingly, this is exactly what's happening with Extreme Networks, Inc. and Ramius Value and Opportunity Investors ("Ramius"). In early July, the Board of Extreme Networks adopted a Rights Plan that prohibits certain persons from acquiring greater than 4.95% of its outstanding common stock. Ramius, which already owns 9.9%, is obviously prohibited from acquiring additional stock of Ramius -- unless a waiver is granted.

Ramius outlined its objections to the Board's plan in a letter dated August 4. The Board responded in a letter dated August 9.