I am looking at a hypo in which a corporation wants to issue new common stock on a pro-rata basis to the original shareholders, at $10 a share. All options that are not exercised will be re-offered to the shareholders who might continue to be interested, until all the stock is sold.
The corporation has a majority (say 55%) shareholder who wants to buy as much new stock as possible. If the proposal is adopted, the majority shareholder has a good chance of increasing his stake, since he can get a majority of the stock that is declined as well*. Can the minority shareholders insist on a minority-only vote under DGCL 242(b)(2), which requires class votes when a class stands to lose rights, on the grounds that it is only the minority shareholders and not the majority shareholder whose stake stands to be diluted?
ETA: Same hypo, another question: Any chance that a claim of vote buying would succeed, since the directors are paying off the majority shareholder to the detriment of the minority shareholders?
*So if the corp. offers 10,000 shares, he immediately is entitled to 5500. Then 22% of shareholders fail to exercise their option to buy stock. So he gets another 1210 shares, plus 55% of the remaining unclaimed shares etc. The point is that he has a disproportionate opportunity to increase his stake as compared to the minority shareholders since he can go from 55% to, say, 70% while a smaller shareholder can go from 2% to 2.54%.
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First of all it matters whether the corporation seeks to just issue more stock, or authorize more shares, as in this issuance would push the corporation over the number of shares authorized in the charter. This would mean they needed to amend the charter to do so - which would require a majority of outstanding shares entitled to vote to approve. Since you are saying the issuance is for common stock, it is unlikely there will be a class vote. I'm pretty sure it needs to change the substantive/special/legal (as in voting) rights of the class involved. Mere dilution of economic value is not enough.
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