I reported last week in this place that two hedge fund shareholders in Orient-Express Hotels Ltd. had offered a proposal to dismantle the dual-class shareholding system in play there.
OEH held its shareholder meeting Friday. Based on the preliminary results reported by the independent inspector, 70% of shareholders supported that proposal.
But of course the vote is of psychological rather than managerial experience. A scheme devised to effectively disenfranchise class A shareholders can't be effectively dismantled by the vote of the class A shareholders!
In a statement yesterday, the principals of the two hedge funds demanded a meeting with the OEH board. They also said: "We continue to believe that the Company’s circular ownership and voting structure – in which an entrenched Board controls 80% of the shareholder vote and remains accountable only to itself – is unlawful."
The company's response is that the board and its management "consider the matter addressed by the Special General Meeting to be closed, and [they] will continue to focus on delivering shareholder returns and managing the business in the best interests of all [their] shareholders."
Nothing very revealing has happened in terms of the stock chart in the two business days since the meeting. The price of a share of OEH gained some ground Monday and lost that ground again Tuesday.
I wouldn't want to get on a goo-goo high horse here, and I've offered the usual caveats in some of my earlier posts. But OEH's structure does seem uniquely unresponsive, and I wonder how long the market will support that. Presumably, the recourse of class A shareholders unhappy with the situation is to sell. If OEH wants to support its stock price, it should concern itself with the archaic nature of this arrangement.
Wednesday, October 15, 2008
Orient Express and its shareholders
Labels:
CR Intrinsic Investors,
DE Shaw,
DJIA,
dual share structures,
hotels
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