American Airlines Fights Acquisition

Airlines have often suffered losses and were hit particularly hard during the COVID-19 pandemic. As a result, American Airlines (AA) has amassed significant losses. In fact, AA has an accrued tax benefit benefit due to $16.5 billion in net operating losses. To help avoid a hostile takeover which would allow the acquirer to claim the tax benefit, as well as a takeover for any other reason, AA has implemented a rights offering. Under the terms of the rights offering, AA will issue one preferred stock purchase right in the form of a dividend to each shareholder if an outside investor acquires more than 4.9 percent of the stock in the company. Each right will allow investors to purchase one share of stock at a 50 percent discount. This would serve to make a hostile takeover more expensive.