Coliseum Capital has gone to court to block Purple Innovation from issuing preferred stock that it argues is designed to entrench management.

According to a complain seen by Insightia, Coliseum asked the Delaware Court of Chancery to declare the preferred stock issue invalid and to rule that Purple’s non-executive directors had breached breached their fiduciary duties.

On February 13, Coliseum nominated a slate of five directors for election at Purple’s 2023 annual meeting, including Coliseum’s co-founder, Adam Gray. But the following day the company announced the preferred stock issue, arguing that the cumulative voting rights associated with the stock will prevent a board sweep by the activist investor already holding around 45% of its share capital.

Without its intervention, “Coliseum might have been able to single-handedly nominate and elect” a majority of the board, Purple said in a press release at the time.

Coliseum didn’t see it that way, writing in its lawsuit that the dividend issuance was designed solely to prevent Coliseum from electing its nominees and removing existing directors, and “violates the company’s charter and was not justified by any conceivable threat to corporate policy or effectiveness.”

Purple Innovation’s stock was trading down around 5% Tuesday afternoon at $4.25 per share.