Star Equity adopts Rights Agreement to protect net operating losses

Star Equity Holdings Board of Directors has adopted, and the Company has entered into, a Rights Agreement with Equiniti Trust Company, LLC, as rights agent, designed to preserve the value of the Company’s significant U.S. net operating loss carryforwards and other tax benefits. Star Equity intends to seek stockholder approval of the Rights Agreement at its 2024 annual meeting of stockholders, although the Rights Agreement is effective immediately. Star Equity had U.S. federal income tax NOLs of approximately $43.2 million as of December 31, 2023. The Company believes that in light of the significant amount of its NOLs, it is advisable to adopt the Rights Agreement. Section 382 of the Internal Revenue Code generally allows a company to use NOLs to offset future taxable income and therefore reduce federal income tax obligations. However, the Company’s ability to use its NOLs could be substantially limited if there is an “ownership change” under Section 382. In general, an ownership change would occur if stockholders viewed under Section 382 as owning 5% or more of the Company’s common stock increase their collective ownership by more than 50 percentage points over a defined period of time. The Rights Agreement and the rights issued under the Rights Agreement will expire on August 8, 2027, or on an earlier date if certain events occur, as described more fully in the Rights Agreement.