Purple Innovation has taken the unusual step of issuing preferred stock with cumulative voting rights to prevent a board sweep by an activist investor holding close to half of its share capital.

The new proportional representation preferred linked stock (“PRPLS”) will be issued to all shareholders and, according to Purple, will allow for a more proportional representation of shareholders on the board in the face of a challenge from Coliseum Capital Management.

“The purpose of the PRPLS is to protect all shareholders and treat them equally,” said Purple Chairman Paul Zepf. “By cumulating their PRPLS votes for certain director nominees, public shareholders can support the election of directors they believe will act independently to represent the interests of all shareholders in the boardroom, roughly in proportion to their collective ownership in the company.”

The mattress-maker announced the step on Tuesday morning, writing in a press release that without its intervention, “Coliseum might have been able to single-handedly nominate and elect” a majority of the board.

The investor owns a 45% stake and because turnout is often lower than the full complement of outstanding shares, Purple feared that Coliseum would have little competition for the seats. If cumulated on the same directors, the PRPLS could help non-Coliseum shareholders elect 55% of the board, the company said.

Coliseum, which previously made a takeover bid that was rejected by Purple’s board, announced yesterday that it would seek to replace five of the company’s seven directors in a proxy contest. Although it plans to leave CEO Rob DeMartini in place, it argued that “the board requires major refreshment.”

Purple said Coliseum had not expressed discontent with the direction of the company or its board until its takeover bid had been rejected and pointed to the fact that Coliseum Managing Partner Adam Gray had sat on its board since 2018, as well as chairing the nominating and governance committee.

The record date for the PRPLS will be February 24 and the stock can be redeemed by two-thirds of the board of directors.

Spotlight Advisors, Sidley Austin, and Morris, Nichols, Arsht & Tunnell are advising Purple.