In July 2020, PDL issued its proxy statement that requested approval by its stockholders of a Plan of Dissolution as the most efficient manner of winding up the Company’s business, paying and making provision to pay its creditors, and distributing the proceeds of its liquidation process to its stockholders pursuant to the Plan of Dissolution.
At PDL’s 2020 Annual Meeting of Stockholders on August 19, 2020, PDL’s stockholders approved the Plan of Dissolution and authorized the PDL Board of Directors (“the Board”) to direct the officers of the Company to file a certificate of dissolution with the State of Delaware (the “Certificate of Dissolution”) upon the Board’s determination that such a filing was in the best interests of PDL’s stockholders.
Following a resolution by PDL’s Board at its November 5, 2020 meeting, PDL filed the Certificate of Dissolution on January 4, 2021. Please refer to the Plan of Dissolution in PDL’s Proxy Statement for a detailed discussion of dissolution, but note the following:
- PDL will continue its existence for three years after filing the Certificate of Dissolution, or such longer period as the Delaware Court of Chancery may direct, for the purpose of prosecuting and defending suits, settling and closing its business, disposing of and conveying its property, discharging its liabilities and distributing to its stockholders any remaining assets.
- Before distributions are made to PDL’s stockholders, PDL will follow the procedures found in the Plan of Dissolution and Sections 280 and 281(a) of the Delaware General Corporate Law (DGCL) (the “Safe Harbor Procedures”) that, in summary, provide that the Company may give notice of PDL’s dissolution to potential claimants, accept or reject claims received, and offer a security for payment of contingent or unmatured contractual claims. Generally, the Safe Harbor Procedures reduce the potential liability of the Company’s stockholders and directors from future claims related to distributions made in liquidation. Under the Safe Harbor Procedures, after giving notice to holders of current, contingent and likely unknown claims and otherwise complying with the Safe Harbor Procedures to resolve those claims, PDL will petition the Delaware Court of Chancery to determine the amount and form of security that will be reasonably likely to be sufficient to pay known pending claims, contingent or unmatured contract claims, and unknown claims that are likely to arise based on facts known to PDL pursuant to the time periods and parameters set forth in the Plan of Dissolution and the DGCL. Upon completion of these steps and paying or making provision to pay claims described in the Plan of Dissolution, PDL will distribute its remaining assets to its stockholders. PDL does not anticipate making any distributions to stockholders before the Safe Harbor Procedures are completed, which are expected to take 12 – 18 months.
- As announced on December 8, 2020, the voluntary suspension of trading and subsequent delisting of PDL’s common stock (Nasdaq: PDLI) occurred prior to market opening on December 31, 2020. The Company’s transfer books closed as of the filing of the certificate of dissolution on January 4, 2021 (the “Final Record Date”). After the Final Record Date, the Company will not record any further transfers of its common stock, except such transfers occurring by will, intestate succession, or by operation of law as to which PDL has received adequate written notice, and PDL will not issue any new stock certificates, other than replacement certificates. In addition, after the Final Record Date, the Company will not issue any shares of its common stock upon exercise of outstanding stock options. As a result of the closing of PDL’s transfer books, it is anticipated that distributions, if any, made in connection with the Plan of Dissolution will be made pro rata to the stockholders of record as the stockholders of record as of the Final Record Date, and it is anticipated that no further trading of the Company’s common stock will occur after the Final Record Date of January 4, 2020.
The following Q&A is intended to help answer questions about the delisting of the PDL BioPharma, Inc.’s (“PDL” or the “Company”) stock and Plan of Dissolution. If you do not find a response to the question(s) you have, please feel free to reach out to us at:
http://investor.pdl.com or (775) 832-8500
Additionally, the responses below should be read in conjunction with the press releases issued by the Company and filings submitted to the Securities and Exchange Commission (the “SEC”) that address these and other matters and are not intended to modify those disclosures. You can find this information at:
Our 2020 Proxy Statement, which describes the dissolution process, can be found at:
Q1: Now that PDL’s stock is no longer listed on Nasdaq, what are my options as a stockholder?
A: We do not expect that your shares will be transferable other than through will, intestacy or operation of law. However, as a stockholder on the Final Record Date, you are entitled to receive a pro-rata amount of future liquidation distributions.
Q2: When does PDL anticipate making liquidation distributions?
A: We have not yet determined the timing or amount of future distributions, which will be determined by our Board of Directors and depend on our progress through the Safe Harbor Procedures in Delaware, the state in which PDL is incorporated and where it filed its certificate of dissolution on January 4, 2021.
We do expect to make one or more distributions after the Safe Harbor Procedures have been completed, provided sufficient funds exist.
Q3: Can you provide more information on the Safe Harbor Procedures in Delaware and how long you anticipate the process will take to conclude?
A: Under the Safe Harbor Procedures and relevant additional provisions of the DGCL and Plan of Dissolution, after complying with the notice and resolution requirements of those procedures, PDL will petition the Delaware Court of Chancery to determine the amount and form of security that will be set aside to pay known and potential claims or otherwise make provision to pay certain claims before distributions are made to PDL’s stockholders. Upon completion of the Safe Harbor Procedures and upon the approval of the Delaware Court of Chancery, we plan to distribute PDL’s remaining assets pro rata to the stockholders of record as of the Final Record Date, January 4, 2021. This distribution may be made in multiple installments, as decided from time to time by the Board. We do not anticipate making any distributions to our stockholders outside of the Safe Harbor Procedures. The Safe Harbor Procedures usually take 12-18 months to complete, but the time to completion may be longer.
Q4: How much do you think will be distributed?
A: The amount to be distributed will depend on how much value we receive for remaining assets to be sold, potential additional revenues from our royalty rights, and amounts collected on prior asset sales as well how much it will cost to settle and otherwise make provision to pay known and unknown liabilities. We direct you to the Company’s third quarter Form 10-Q as of September 30, 2020 as filed with the SEC for PDL’s estimate of net assets available in liquidation as of the date of filing of the Form 10-Q. There are many estimates and assumptions that go into the determination of net assets available in liquidation as well as many risks and uncertainties during the dissolution process and the actual amount of distributions made will vary from the estimate and may vary in material respects.
Q5: Will all future distributions be in the form of cash?
A: The forms of future distributions will depend on whether we sell our remaining income generating assets, such as our royalty rights, prior to completing the dissolution process. If we sell our income generating assets, such as our royalty rights, we anticipate all future distributions will be made in cash. If we do not sell our remaining income generating assets, they (and other remaining assets, if any) may be placed in a liquidating trust whereby the PDL stockholders of record as of the Final Record Date would receive a beneficial interest in the liquidating trust. Although receipt of a beneficial interest in a liquidating trust would technically not be in the form of cash, any future distributions to the beneficial interest holders in the trust would be expected to be in the form of cash, although property dispositions are possible.
Q6: Do I need to do anything to register my shares so any future distributions will be sent to me?
A: No. Distributions will be made to all stockholders as of the Final Record Date. Any such distributions will be made to the brokerage account with custody of your shares in PDL.
Q7: Will you notify stockholders in advance of any distribution?
A: We will provide necessary information to stockholders when an actual distribution will be made and expect to provide updates of other material developments by posting on the Company’s website PDL.com.
Q8: Is it possible for a market to develop for your stock?
A: PDL will not participate in any future market for its stock. Future distributions will be paid to the stockholders of record on the Final Record Date, January 4, 2021, the date when the transfer books closed.
Q9: What are the tax implications of the distributions made to Company stockholders in 2020 of shares of Evofem Biosciences Inc. and LENSAR, Inc.?
A: We intend for distributions made pursuant to PDL’s Plan of Liquidation to be treated as a series of distributions in complete liquidation of the Company. In accordance with such treatment, the distributions will be treated as received by each PDL stockholder in exchange for the stockholder’s PDL common stock. The amount of a distribution allocable to a block of shares of PDL common stock held by a stockholder will reduce the stockholder’s tax basis in such shares, but not below zero. Any excess amount allocable to such shares will be taxable as gain, which gain will be capital gain if the PDL common stock is held as a capital asset (which we assume to be the case for purposes of this response). Any tax basis remaining in a share of our common stock following the final liquidating distribution by the Company will be treated as a capital loss. The deductibility of capital losses is subject to limitations. Please see the Forms 8937 posted on the Company’s website regarding the effect of the distributions of shares of Evofem Biosciences Inc. and LENSAR, Inc. on your tax basis in your shares of PDL common stock.
We direct your attention to the Company’s 2020 proxy statement as filed with the SEC on July 7, 2020 for a discussion about material U.S. federal tax consequences to U.S. and Non-U.S. holders as defined therein. The discussion above and in our proxy statement does not purport to be a complete analysis of all potential tax effects and we encourage you to consult a tax advisor for your personal tax situation.
Q10: What are the tax implications of future distributions?
A: We direct your attention to the Company’s 2020 proxy statement as filed with the SEC on July 7, 2020 for a discussion about material U.S. federal tax consequences to U.S. and Non-U.S. holders as defined therein. The discussion does not purport to be a complete analysis of all potential tax effects and we encourage you to consult a tax advisor for your personal tax situation.