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Helping public companies and their suppliers deliver better and more cost-effective programs since 1994

“MINI-TENDER” OFFERORS ARE BACK AGAIN

“HEED THE JUDGE” IN A LANDMARK CASE, BEFORE TURNING OVER YOUR SHAREHOLDER RECORDS TO UNKNOWN AND POSSIBLY UNSCRUPULOUS “SERVICE PROVIDERS.”

Recently, the Society Huddle - perhaps the best source of breaking issues and of good solutions anywhere – posted an inquiry from an issuer about “mini-tenders” and the company’s obligations, if any, to furnish offering materials to shareholders, following a “friendly inquiry” about procedures from a previously unknown entity.

Here is the response we posted - along with our oft-repeated warning about scamsters and outright fraudsters that periodically try to make unsolicited and below-market offers to shareholders:

“Every few years we see a sudden upsurge in “mini-tenders” being offered by entities other than the transfer agents and proxy solicitation firms that specialize in issuer authorized “odd-lot buybacks.”

“Typically, an entirely different breed of small and never-before-heard-from entrepreneurs springs up, trying to offer holders of 99 shares or less a deal to buy out their holdings themselves.

“Most often, but not always, they are aimed at investors in thinly traded companies, where typically the offerors take advantage of the limited market to offer a price per share that is much less than the intrinsic value of the stock – along with fees that are often substantially above the going rates for such deals when sponsored by the corporation itself.

“I am not a lawyer, but I am 99% sure that not only do public companies NOT have to authorize the distribution of such materials to their shareholders, they would be unwise to do so unless they make a very thorough check on the offering entity, and look carefully at the fairness of the terms and conditions being proffered to shareholders. Issuers run a serious risk of breaching their fiduciary duties to share owners if the deal is later found to have disadvantaged them, of if, God forbid, the entity disappears without paying out the proceeds to participants, as has indeed happened.”

The very next day we heard from a prominent Delaware lawyer that yes, they have been seeing an upsurge in clients who were receiving similar “friendly inquiries” from parties that were previously unknown to them. And, of course, he completely agreed that issuers had no obligations to pass along such materials - and could incur serious liabilities were they to do so. Forewarned is forearmed, dear readers.

“Way back in 1994 The OPTIMIZER issued a warning to issuers to “Heed the Judge in the [landmark] Badger v. Tandy case” that we have repeated periodically ever since. While this case concerned a “lost shareholder search firm” it is equally applicable here:

“A corporation should be cautious in handing around its record of missing shareholders” - or any shareholder records we’d add. “When a shareholder does not know what shares he owns in what company or the value thereof, the circumstances are ripe for overreaching by unscrupulous hunters...A corporation has an interest in protecting its shareholders from abuse.”....Words to live by, for sure....”

Readers: We would be very interested in hearing from you if your Company has received unsolicited offers to authorize the release of shareholder records to publicize and/or facilitate a “mini-tender offer”....on a strictly

confidential basis of course.

And, P.S. - just as we were going to press, we got an e-mail from a Fortune-50 company - one with a very handsome dividend and with a bit more volatility than usual of late - attaching a “friendly” pitch to have them send out mini-tender docs. It looked to us as if the prospective offeror was basically an arb, who could easily time his actions to snatch away the dividend from unwary investors - and make a quick and guaranteed return for himself - plus some fat fees (although none were specified) – and who made no case at all as to how the company, or its shareholders would benefit from his sketchily described deal. Why, we ask again, would any public company want to aid and abet him by handing over sensitive corporate records of small shareholders?