What is the name of your state? OH
I purchased the stock of an insurance company about a year ago. At the time, it seemed like a simple investment. The company was behind on their financial reporting and a dissident shareholder had filed a preliminary contested proxy in order to have representation on the Board of Directors (BOD) when the proxy vote came by replacing all the Directors coming up for a vote. (The current CEO was on of the members that would have been up for reelection.) The stock price was well below the per share surplus, so I felt comfortable. All that needed to happen was the new financials needed to come out and/or the proxy vote and the price should have popped.
Well, the insurance company started suing the dissident shareholder in multiple jurisdictions saying that it was trying to takeover the business. This may have been a possibility since the shareholder did have interests in insurance companies, but they would have had to offer a fair price and new mgmt would have been welcome. The BOD and Mgmt of the insurance company had wiped out a couple of billion dollars of market capitalization due to poor management over the prior seven or so years. The dissident shareholder took the company to Delaware Court to force a proxy vote. Guess what? A public company can't have a proxy vote when their financials aren't up to date. The Delaware Court, after Mgmt promised to update the financials, ruled that the company had to have a vote and set a date. I waited and waited for the meeting notice, but nothing came. A couple of days before the court-appointed meeting deadline, I spoke with IR and found out that there was going to be a meeting, but they couldn't announce it because the company didn't have their financials done. I couldn't make it to the meeting on that short of notice. There ended up being a meeting. The dissident shareholder and the company basically called a truce whereby the dissident shareholder got a couple of board seats, but not all they wanted, and all of the existing board members got to stay in their positions.
Meanwhile, during all of this the stock price kept slipping as the uncertainty lingered and management kept mismanaging the assets. The BOD and Mgmt made NO public statements. Basically, shareholders were kept in the dark regaridng what was taking place and the state of the business. That was last November. It took until February to name a new CEO (with a huge new contract), but they didn't fire the old one.
In about March, one of the state insurance commissioner's starting making some noise in the local newspapers. This was actually good because the state insurance commissioner would tell you the state of the businesses. Basically, the state subsidiaries were ok, but the holding company and mgmt were really messed up. This was backed up by the statutory financials that were filed with the states. They needed capital. A sale would have been the easiest choice. It should have been a fairly easy decision and transaction if they had diligently started on it right away and shown some urgency. They didn't.
In May, the company finally filed the missing financial report, but now they were another year down. The insurance commissioners started making a lot of noise at this point. Basically stating in the newspapers that a transaction (sale) needed to take place by the end of June or else they were taking over. At the end of June, no transactions were announced. I know that Mgmt had told a shareholder during June that they weren't worried and they hoped everything would be settled in a couple of weeks.
By July 1, the states took all of the insurance subsidiaries over for "rehabilitation". The shares are now basically worthless. I think there was a deal on the table that the board (or states) didn't or couldn't accept and the common shareholders got screwed. As you can imagine, the company doesn't really like talking to the shareholders about specifics right now.
I'm assuming that the states will sell the subsidiaries. I believe they are worth something, but I'm doubting the common will ever see any of it. The proceeds will go to the holding company since the company didn't fail. The bondholders will get paid next. I'm assuming that the BOD and Mgmt will then spend the rest of the money on legal expenses and paying themselves leaving nothing for the common. They haven't started reducing expenses yet, or shown a willingness to look out for the equity holders.
What options do I have to make sure my interests as a common shareholder are protected in this situation? I'm assuming the only solution would cost me a lot of money suing the BOD and Mgmt, individually and as a group, along with the nationally-known accounting firm that held up the financials statements, but I wanted to make sure. I would like to know all the options available.
I purchased the stock of an insurance company about a year ago. At the time, it seemed like a simple investment. The company was behind on their financial reporting and a dissident shareholder had filed a preliminary contested proxy in order to have representation on the Board of Directors (BOD) when the proxy vote came by replacing all the Directors coming up for a vote. (The current CEO was on of the members that would have been up for reelection.) The stock price was well below the per share surplus, so I felt comfortable. All that needed to happen was the new financials needed to come out and/or the proxy vote and the price should have popped.
Well, the insurance company started suing the dissident shareholder in multiple jurisdictions saying that it was trying to takeover the business. This may have been a possibility since the shareholder did have interests in insurance companies, but they would have had to offer a fair price and new mgmt would have been welcome. The BOD and Mgmt of the insurance company had wiped out a couple of billion dollars of market capitalization due to poor management over the prior seven or so years. The dissident shareholder took the company to Delaware Court to force a proxy vote. Guess what? A public company can't have a proxy vote when their financials aren't up to date. The Delaware Court, after Mgmt promised to update the financials, ruled that the company had to have a vote and set a date. I waited and waited for the meeting notice, but nothing came. A couple of days before the court-appointed meeting deadline, I spoke with IR and found out that there was going to be a meeting, but they couldn't announce it because the company didn't have their financials done. I couldn't make it to the meeting on that short of notice. There ended up being a meeting. The dissident shareholder and the company basically called a truce whereby the dissident shareholder got a couple of board seats, but not all they wanted, and all of the existing board members got to stay in their positions.
Meanwhile, during all of this the stock price kept slipping as the uncertainty lingered and management kept mismanaging the assets. The BOD and Mgmt made NO public statements. Basically, shareholders were kept in the dark regaridng what was taking place and the state of the business. That was last November. It took until February to name a new CEO (with a huge new contract), but they didn't fire the old one.
In about March, one of the state insurance commissioner's starting making some noise in the local newspapers. This was actually good because the state insurance commissioner would tell you the state of the businesses. Basically, the state subsidiaries were ok, but the holding company and mgmt were really messed up. This was backed up by the statutory financials that were filed with the states. They needed capital. A sale would have been the easiest choice. It should have been a fairly easy decision and transaction if they had diligently started on it right away and shown some urgency. They didn't.
In May, the company finally filed the missing financial report, but now they were another year down. The insurance commissioners started making a lot of noise at this point. Basically stating in the newspapers that a transaction (sale) needed to take place by the end of June or else they were taking over. At the end of June, no transactions were announced. I know that Mgmt had told a shareholder during June that they weren't worried and they hoped everything would be settled in a couple of weeks.
By July 1, the states took all of the insurance subsidiaries over for "rehabilitation". The shares are now basically worthless. I think there was a deal on the table that the board (or states) didn't or couldn't accept and the common shareholders got screwed. As you can imagine, the company doesn't really like talking to the shareholders about specifics right now.
I'm assuming that the states will sell the subsidiaries. I believe they are worth something, but I'm doubting the common will ever see any of it. The proceeds will go to the holding company since the company didn't fail. The bondholders will get paid next. I'm assuming that the BOD and Mgmt will then spend the rest of the money on legal expenses and paying themselves leaving nothing for the common. They haven't started reducing expenses yet, or shown a willingness to look out for the equity holders.
What options do I have to make sure my interests as a common shareholder are protected in this situation? I'm assuming the only solution would cost me a lot of money suing the BOD and Mgmt, individually and as a group, along with the nationally-known accounting firm that held up the financials statements, but I wanted to make sure. I would like to know all the options available.