Pittsburgh Corporate Attorney Jeremy Garvey Quoted on Anti-Dilution Clause in Wall Street Journal

Jeremiah G. Garvey, a shareholder in the Corporate Finance & Technology Section of Buchanan Ingersoll & Rooney's Pittsburgh office as well as a member of the firm's Board of Directors and co-chair of the firm's Securities/SEC Practice Group, was quoted in an October 7, 2010, article published in The Wall Street Journal. The article, titled "Borders Warrants Offer Potential Relief To Pershing Square's Ackman," reported on Borders bookstore's investor William Ackman of Pershing Square Capital Management. According to the article, "Ackman has paper losses of $158 million on his 10.6 million common stake in the troubled book retailer … He has warrants, however, for a total of 26 million shares at a strike price of 65 cents. He could exercise the warrants and sell shares to reduce his potential losses."

The article went on to explain that "Ackman protected his investment in Borders by exacting concessions in a $42 million loan deal with the retailer two years ago. In the April 2008 loan commitment, Ackman and Pershing got warrants to buy 14.7 million shares at a $7 strike price, and they included an anti-dilution clause that would give Ackman the right to convert the warrants into 19.99% of outstanding common stock in certain circumstances. … Anti-dilution clauses are common in venture capital deals, especially where savvy investors such as Ackman can negotiate tough terms with companies in need of cash."

Garvey weighed in on the situation noting the fact that Borders agreed to the clause in the loan commitment "speaks to the fact that you had to cut a deal."