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 at least 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. In accordance with 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 petitioned the Delaware Court of Chancery to determine the amount and form of security that will 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. After PDL completed the claims resolution process under the Safe Harbor Procedures, PDL filed a Verified Petition For Determination Pursuant to 8 Del. C. Sec 280(c) on February 10, 2022. Subsequently, PDL filed a Motion for First Interim Distribution to Stockholders, which motion was granted by the Delaware Chancery Court on May 10, 2022. In its order, the Court has required that the Company retain a security of $93,208,494 against future liabilities and expenses. On May 13, 2022, the Company made a cash distribution of $1.00/share to its stockholders of record as of January 4, 2021.
- 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, distributions made in connection with the Plan of Dissolution are made pro rata to 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, 2021.
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.
Additionally, the responses below as well as the investor updates issued by the Company should be read in conjunction with the 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: http://investor.pdl.com/ or at https://www.sec.gov/cgi-bin/browse-edgar?CIK=882104&owner=exclude.
Our 2020 Proxy Statement, which describes the dissolution process, can be found at:
Our 2020 Form 10-K, which was filed with the SEC on March 29, 2021, may be found at:
Our most recent investor update dated March 29, 2021 as well as our 2020 Proxy Statement and 2020 Form 10-K may also be found at http://investor.pdl.com.
PDL made a cash distribution of $1.00/share on May 13, 2022. We continue to work towards completion of the dissolution of the Company, including the resolution of pending claims and the monetization of our remaining assets. We cannot be certain of the timing and amounts of additional distributions. However, as we collect additional revenue, resolve pending and potential claims, and monetize assets through the dissolution process, and to the extent our Board of Directors believes it appropriate to do so, we will request that the Court approve additional distributions.
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 Annual Report or Form 10-K as of December 31, 2020 as filed with the SEC, as well as our quarterly investor updates at pdl.com/investor-updates, for PDL’s estimate of net assets available in liquidation. 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.
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.
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.