Wednesday, November 28, 2007

What's a Gyrodyne

I recently encountered the name Gyrodyne, as that of the plaintiff in a lawsuit against Phillip Goldstein and Bulldog Investors. My reaction was that same as I imagine yours would be (given my conception of who "you" are -- a digression that you wouldn't want me to enter into either). Who or what is Gyrodyne?

I cared because the name of Phillip Goldstein is very familiar to me. I've covered some of the litigation in which he's been enmeshed. When the SEC sought to require hedge funds to register as investment advisers, most of the hedge fund industry thought this a small matter, a little added paperwork, much easier to comply with than to fight.

Goldstein fought. He contended that the SEC didn't have the statutory authority it claimed, and he pursued that question, successfully, to the US Supreme Court, destroying the registration mandate.

I saw Mr. Goldstein at a convention of activist investors in California last month, and the moderator of one particular panel in which he was a participant introduced him as a "libertarian hero."

When that moderator opened the floor to questions, I spoke very briefy to Phil Goldstein, not about the registration matter but about the idea of "empty votes," the hedging away of the real economic interest of shares to retain only their voting value. Some scholars have thought such a tactic to be a real threat to rational corporate governance, others have thought it a phantom.

That, then, was the gist of my question. I may discuss the "empty votes" controversy here another time. For now, let it stand only as evidence that I have followed Goldstein's career. For that reason, I care when I run across a lawsuit in which he's a defendant.

The plaintiff, again, is Gyrodyne Company. Who's that? Its the owner of some industrial and commercial real estate on Long Island, NY.

Goldstein is apparently waging a proxy fight to take over Gyrodyne's board of directors, on the ground that the company has depressed its own value through a "poison pill" discouraging potential acquirers.

Gyrodyne responded with a lawsuit in Manhattan federal district court last week, saying that Goldstein/Bulldog is using false and misleading proxy materials.

The following is directly from Gyrodyne's press release:

"We filed this suit ... to ensure that our shareholders receive complete and accurate information about the Bulldog group's interests, plans and motivations that is required by the federal securities laws....We will continue to take appropriate steps to protect the interests of Gyrodyne shareholders."

As kids of the playground, watching a fight develop, might say at this point: Ooooooo.

Gyrodyne's annual meeting is a week from today. I hope to come back to this before then.

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