Here are the relevant parts of todays BWEN filings
From the 8-A12B:
On February 12, 2013, the board of directors of Broadwind Energy, Inc. (“Broadwind”) adopted a Section 382 stockholders rights plan and declared a dividend distribution of one right for each outstanding share of our common stock to stockholders of record at the close of business on February 22, 2013. Each right entitles its holder, under the circumstances described below, to purchase from us one one-thousandth of a share of our Series A Junior Participating Preferred Stock at an exercise price of $14.00 per right, subject to adjustment.
In the event that a person or group becomes an acquiring person (a “flip-in event”), each holder of a right (other than any acquiring person and certain related parties, whose rights automatically become null and void) will have the right to receive, upon exercise, common stock having a value equal to two times the exercise price of the right. If an insufficient number of shares of common stock is available for issuance, then our board of directors would be required to substitute cash, property or other securities of Broadwind for the common stock. The rights may not be exercised following a flip-in event while Broadwind has the ability to cause the rights to be redeemed, as described later in this summary.
For example, at an exercise price of $14.00 per right, each right not owned by an acquiring person (or by certain related parties) following a flip-in event would entitle its holder to purchase $28.00 worth of common stock (or other consideration, as noted above) for $14.00. Assuming that the common stock had a per share value of $3.50 at that time, the holder of each valid right would be entitled to purchase eight shares of common stock for $14.00.
So if I'm reading this right, for each share of common stock you get a right to buy 1/1000th of a share of preferred stock for $14.00.
In the event that someone comes along and buys 5% of the company and causes the NOL's to lose their value, then you would be allowed to exercise each right to buy twice the value of common stock. So you pay $14.00 and you get $28.00 worth of common stock at the price it is on the day you exercise the right.
So if you're holding 10,000 shares today at a price of 3$ per share, you get 10,000 rights to buy 28$ worth of common stock for $14 in the event someone buys more than 5% of BWEN. So you paid $30,000 for your existing 10,000 shares today, then a few months down the line, someone causes the NOL's to become worthless and your rights will now fetch you $280,000 worth of common stock for $140,000 for a profit of $140,000 on your initial $30,000 dollar investment.
Maybe I'm completely off in how I'm interpreting this... but if I'm not thats pretty good protection for existing shareholders.
In general, Broadwind may redeem the rights in whole, but not in part, at a price of $0.001 per right (subject to adjustment and payable in cash, common stock or other consideration deemed appropriate by our board of directors) at any time until ten days following the stock acquisition date. Immediately upon the action of the board of directors authorizing any redemption, the rights will terminate and the only right of the holders of rights will be to receive the redemption price.
So for each $3 share you get a right that in the event someone triggers the clause, BWEN will redeem their rights at a tenth of a cent each, making the value of this basically nothing. Or am I still reading it wrong?
I don't think I'm reading/understanding this correctly. It wouldn't make sense to basically give someone 14$ for owning 3$ worth of stock in the event someone buys 5% of the company. Can someone straighten me out?