LivePerson LPSN has opted for a tax benefits preservation plan (NOL Plan) to protect its net operating loss carryforwards (NOLs), which is estimated at more than $400 million as of Dec 31, 2023. This decision has come after a recent development where a new stockholder has announced the singlehanded ownership of the company’s 10% common stock.
The board anticipates a change in ownership under Section 382, combined with ownership shifts in LivePerson's stock over the past three years. This change might significantly limit the company's ability to use its valuable NOLs to avail tax benefits.
According to Section 382, the "ownership change" would happen if the individuals or entities holding at least 5% of the company's stock increase their total possession in LivePerson by more than 50% points over the lowest ownership percentage they previously had, within a rolling three-year period.
LivePerson, Inc. Price and Consensus
With a unanimous vote for the NOL Plan, the board will prevent substantial harm to the company's NOL assets. The NOL Plan is designed to protect LPSN's NOL assets. It discourages stockholders from owning 4.9% or more of LivePerson common stock without the board’s approval. If a stockholder already owns 4.9% or more before the plan's announcement, the investor’s current ownership is allowed but more shares cannot be acquired without the board’s approval.
The company, in a bid to prevent concentration of ownership, has also announced the issuance of additional rights to the existing common stockholders. For every outstanding share of LivePerson common stock, the board declared a dividend of one such right. The rights will last until Jan 21, 2027. But if the shareholders of LPSN don't approve the NOL Plan at the 2024 Annual Meeting, the rights will end on Jan 21, 2025.
For LivePerson, the net operating loss carryforwards are a crucial instrument as the company’s profit has remained below the breakeven point regularly in the past. The company has registered a loss in three out of the last four quarters. LPSN can use this NOL Plan to offset future taxable income. By carrying forward the net operating losses, companies can reduce their taxable income in profitable years, leading to lower tax liabilities.
Zacks Rank and Stocks to Consider
Currently, LivePerson carries a Zacks Rank #3 (Hold). Shares of LPSN have declined 75.1% in the past year.
Some better-ranked stocks from the broader technology sector are Blackbaud BLKB, BlackLine BL and Arista Networks ANET, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Blackbaud's fourth-quarter 2023 earnings per share has declined by 4 cents to $1.04 in the past 90 days. Shares of BLKB have returned 33.8% in the past year.
The Zacks Consensus Estimate for BlackLine’s fourth-quarter 2023 earnings has been revised by a penny northward to 55 cents per share in the past 30 days. Shares of BL have lost 13.6% in the past year.
The Zacks Consensus Estimate for Arista’s fourth-quarter 2023 earnings has been revised by 13 cents northward to $1.70 per share in the past 90 days. Shares of ANET have rallied 120.6% in the past year.