Purple Innovation Goes to the Mattresses in Fight With Coliseum Over Unsolicited Bid
Experts say the company would run better as a private enterprise, but long time shareholders loathe the offer
Purple Innovation Inc. (US:PRPL) on Monday went to the mattresses in its fight with activist Coliseum Capital and its unsolicited buyout offer, adopting a shareholder rights plan known as a "poison pill," making it more costly for the company's biggest shareholder to accumulate more than its current 45% stake.
The Utah-based mattress maker the plan would give its board more time to evaluate Coliseum's $4.35 a share bid, which would value the company at $360 million.
Purple's rights plan has a 20% ownership trigger, but grandfathers current shareholders with stakes already above that.
Coliseum revealed its bid early last week in a 13D filing with the US Securities & Exchange Commission that it offered $4.35 a share, or a total of $225.6 million, to buy the balance of Purple Innovation it doesn't already own.
Purple confirmed the offer last week and said its board would "carefully review the proposal to determine the course of action that it believes is in the best interest of Purple and all Purple shareholders."
It reiterated that sentiment on Monday.
Coliseum Capital is a Connecticut-based hedge fund founded in 2005 by Christopher Shackelton and Adam Gray. The hedge fund owns just under 50% of PRPL's 40.85 million outstanding shares.
While the offer represented a 56% premium to PRPL's Friday closing price, it is 67% below PRPL's $13.27 at the end of 2021.
According to Matt Koranda from Roth Capital Partners, that could be a sticking point. They noted the offer's healthy premium, with the caveat that longtime shareholders had cost bases well above the bid and were not eager to sell.
Roth remains 'neutral' on the stock.
The fight should be interesting, as insiders collectively own just over 35% of the company and have been buying. On the other side is Coliseum's 45%, now burdened with a poison pill. If the matter ever gets to a vote, the votes from the remaining 20% of the shares should call the tune.
According to Purple's bylaws, the transaction needs yes votes from 67% of shareholders to approve the takeover.
Fintel's insider accumulation score of 90.91 is bullish on the company as it ranks PRPL in the top 2% of 14,547 screened constituents. The score is calculated by ranking companies with a combination of the net number of insiders buying stock and the total shares purchased as a percentage of float.