Pinnacle Partners v. Forgent Networks Inc.

Forgent Networks Inc. is the legal name of a Texas-based enterprise that does business as Asure Software and that trades on Nasdaq as ASUR.

Pinnacle Partners LLC is an activist hedge fund run by David Sandberg with a stake in ASUR.

On May 4, 2009, Sandberg filed a Schedule 13D on Pinnacle's behalf announcing his/its intention to initiate a proxy fight in hopes of voting down the "going private" transaction on which the stockholders will vote at a special meeting scheduled for June 2, 2009.

I'll just lazily link you to a further discussion by a less indolent blogger, "Dave in Hackensack" as he calls himself.

Enjoy.

Google's options

Google announced this week that it has re-priced 7.64 million stock options belonging to 15,642 non-executive employees.

Why? The stock's price (NASDAQ: GOOG) has taken a beating in the last year, not unlike everybody else's. It peaked at $594.90 in early May 2008, then tumbled to $259.56 on November 20. That represents a loss of about 56% percent of value, peak to trough.

There was some recovery (post-election optimism? Your call) so that on February 9, GOOG closed at $378.77. The optimism has worn thin, and the stock was back down to $308.57 when they made the announcement changing the options terms Tuesday.

A stock option has an "exercise price." The idea of giving options to employees of course is that it gives them the incentive to work to get the actual price well above the exercise price, so that they can garner the difference when they cash in.

But Google's employees have of late found themselves with options on $300 stock with an exercise price that was reasonable when they were at the peak -- $500 a share or higher. That far underwater, incentive effects are hard to imagine.

Look for such deals to become a contentious issue in the months to come, though, as stockholders worry about the dilution of the value of their stocks for the benefit of employees. Likely ticked-off shareholder argument: "Do we really need to worry about incentive effects in today's labor market? Will the top talent in Google's fields leave? If so, where will they go? who is hiring?"

Cleveland IT Contractor negotiating w/Ramius

Agilysys, Inc., an IT contractor headquartered in Ohio (Nasdaq: AGYS), faces a proxy contest from Ramius LLC, in connection with the company's annual meeting scheduled for March 26.

Three members of Agilysys' (staggered) board will stand for re-election at that meeting. The Ramius/challenge slate consists of: John Mutch; Steve Tepedino; James Zierick.

Their grievance? In the words of their proxy statement: "In light of the Company’s continued poor operating performance, we believe that it is imperative that management and the Board immediately commit themselves to: realigning the cost structure of all three business units to achieve margins on par with industry peers;
significantly reducing corporate overhead; and refraining from making any further acquisitions."


It appears that negotiations are underway. In a statement, Agilsys' chief executive, Martin Ellis, said recently: "We are always willing to work with shareholders and on many occasions we have met with Ramius representatives to conduct negotiations to avoid a potential proxy contest. We hope these discussions can continue in good faith."

The negotiations are aimed at a "standstill agreement." Not, in other words, making Ramius happy but giving it enough in terms of board representation so it will agree to a standstill into 2010. This seems likely to involve conceding two of the three positions now contested, which would represent 2/9ths of the overall board.

The three incumbents each, pending any such dea, seeking re-election are: Thomas A. Commes; R. Andrew Cueva; Howard V. Knicely.

Burns out at O'Charley's

I'm a little late with this -- it was on December 24 -- but hey, sue me.

A restaurant operator, O'Charley's Inc., has reaxched agreement with a hedge fund under threat of a proxy contest.

Under the agreement, long-time CEO Gregory Burns is stepping down, effective Fevruary 12.

The hedge fund involved is Crescendo Parties, of which we have ghad cause to speak on this blog before.

O'Charley's operates three restaurant chains, the eponymous O'Charley's, as well as Stone River Legendary Steaks and 99. I'm a regular patron of the Enfield, CT 99 restaurant, so this proxy fight strikes me as more interesting than some I have chronicled.

Burns has been around for a long time. He has been with O'Charley's for 25 years, and has been CEO for 16 of those. What led to his downfall?

An ugly stock chart(Nasdaq: CHUX), for one thing. The common stock was selling for $10 a share at the start of September. Three months later that was down below $2.

Of course, those three months were bad for a lot of listed companies. The Nasdaq 100 and the S&P indexes both show losses of 40% of their respective value over the same period. Still, CHUX lost 80% of its value, so stockholders naturally feel that the loss was twice as bad as it had to be.

More tomorrow.

New boss at the SEC

Many of the announcements that have been coming from the camp of the President-elect in recent weeks have been designed to assure us that not too much will change.

They've made these announcements even at the expense of disillusioning their base. One example (IMHO a trivial one) involves the choice of Rick Warren to pray at the inaugural ceremony.

Another example, one that has a good deal more to d with the pulic welfare, as well as with the interests of this blog, than who does the ceremonial praying, is: who will head the Securities and Exchange Commission?

Subect to Senate approval, Obama's answer to that question is Mary Schapiro.

The world of Wall Street knows Ms Schapiro. They're comfortable with her. This seems to have been her chief recommendation for the president-elect. At the press conference announcing this pick, he read from her resume: Mary Schapiro currently serves as the chief executive officer of the Financial Industry Regulatory Authority, the largest regulator for all securities firms that do business with the United States. Before that, she served as an SEC commissioner, and as chairwoman of the Commodity Futures Trading Commission

FINRA, of course, isn't a "regulator" in the public-sector sense. It's a New York based brokerage industry self-regulatory body. ("Not that there's anything wrong with that," I say in Seinfeldian tones. My goal here is clarity we can believe in.)

Schapiro was an SEC commissioner for six years, a period that began while Ronald Reagan was in office, continued through the presidency of the elder Bush, and into that of Bill Clinton. Under Clinton, she moved to the CFTC, where she served from late 1994 until early 1996 -- about 15 months. She thereafter accepted a job with the self-regulatory arm of the NASD. That arm then merged (in the distant summer of 2007) with the self-reg folks at NYSE to become FINRA.

Somewhat amusing sidebar: the first plan was to name the merged entiity SIRA, for "Securities Industry Regulatory Authority." That name was abandoned for reasons havibg something to do with Danish cartoonists, i.e. it was deemed insensitive because of its similarity to an Arabic term describing the traditional biographies of the prophet Mohammed. FINRA was adopted as least likely to give any offense to anybody.

You can make of this what you will. Personally, I have to leave now to worship at the holy church of flyng spaghetti, where we study our finra texts carefully for signs of the apocalypse. And we're really offended by this appointment.

Rectifier Update

International Rectifier has set the date for its annual meeting.

I last wrote about IRF in September. Since that time, the price of the stock has dropped steadily, from the neighborhood of $20 to that of $12.

Yes, everybody else has been dropping during that priod, too, but not as severely. If we round out the period in which we're interested to an even three months, the math is easier (or, tobe frank, the Nasdaq site will do the work for me).

IRF has lost 44.9% of its value over three months. The Nasdaq 100 has lost 31.4% of its value. The DJIA has suffered comparatively little, -22.5%.

Anyway, the IRF has set the date: January 9, in Los Angeles, California.

I had thought, in September, that there would be a challenge slate. But it now appears that the challenge didn't materialize, that the two members of the board up for re-election are running unopposed.

On the other hand (the "good news" for fans of conflict), it does appear that the meeting will consider a proposal to de-classify the board.

Tecumseh victory

Tecumseh Products Co. announced Friday that it has defeated a challenge by dissident shareholders led by the Herrick Foundation.

In a statement, the chairman and chief executive of the compressor manufacturer said: "We thank our shareholders for thoughtfully reviewing the voting alternatives and providing their support for our current board of directors and, by extension, for the strategic direction we have set."

Anyway, I did enjoy the opportunity this particular proxy contest gave me to learn a little bit about the different sorts of compressors. See my entries for Nov. 10th and 11th for the particulars.

Tecumseh's class B common stock (the class with voting rights) trades on Nasdaq under the ticker symbol TECUB. It's price reacted well Friday to the late-morning announcement of the incumbents' victory, rising from $8.23 a share to $8.79.

The Herrick Foundation issued a statement that sought to make lemonade out of the lemon-like result. The provocateurs there are encouraged by the supportive votes they did receive, and will continue to seek to protect Tecumseh shareholders' best interests, blah blah blah.

It's the usual post game locker-room stiff-upper-lip stuff.

Biogen Idec

In a filing with the SEC yesterday, Carl Icahn and associated entities said that they've increased their stake in the biopharm company Biogen Idec from 4.3% to 6%.

Biogen, a Cambridge, Mass. based concern, (NASD: BIIB) has a market value of close to $15 billion, and employs more than 4,000 people.

Two months ago, Icahn tried to get three nominees on the Biogen board, and as regular readers of this blog know, they were defeated.

But Icahn is nothing if not persistent, and that he has responded to defeat not by liquidating his stake but by increasing it is characteristic.

There is also the little matter of the price chart. The price of a share of BIIB was above $57 when Icahn's slate lost that election. It's below $51 now. What has changed?

This has changed: there have been two occurrences of a fatal brain disease, progressive multifocal leukoencephalopathy (PML), among patients receiving a Biogen producr, Tysabri. Tysabri has been linked with PML before, and these new occurrences could spook doctors into keeping their patients off the stuff.

If that happens, it could be a misfortune all around. Tysabri is reportedly very effective in improving the quality of life of people with both multiple sclerosis and Crohn's disease which is why it was allowed back on to the market despite a previous round of PML reports in 2005.

Both of the two new Tysabri-taking PML patients were warned that an increased risk of that disease was a side effect of this drug.

Risk/reward. Reward/risk. It isn't just business. It's life. Though one must always hope that the researchers in the field will press on toward improving the terms of such trade-offs.

Reverse Stock Split

Tomorrow, Biotech firm Cell Therapeutics Inc. will hold a shareholders' meeting in Seattle, Wash., at 10 AM local time, to elect directors to its board, approve a reverse stock split, and conduct other business.

It doesn't appear that there will be any fireworks at this meeting, but I'm intrigued by the company's dual listing -- it is listed both on Nasdaq and on the MTA, the Italian stock exchanged headquartered in Milan. [For those who need to know what initials stand for in any language, the MTA is the Mercato Telematico Azionario.]

Looking at the Nasdaq one-year chart, I have to say: it isn't a pretty sight. A share of CTIC was worth $3.50 a year ago. It had a brief upward move to $5 in mid-July 2007. But it has been steadily downhill ever since, and at close of business yesterday that share was fetching just $0.52.

Hence the "reverse stock split," a strange expression but one to which the business world seems accustomed. I've always wondered, "why not call it a stock meld?" or some other word with a meaning antithetical to "split"? If a company has a stock split, and I own two shares, then tomorrow I'll own four. Presumably if nothing else changes in the meantime the price of a share of that stock will be cut in half by the split, too. If my company has a stock meld (aka a reverse split) and I own two shares, then tomorrow I'll own just one share, presumably of twice the market value.

This is a matter of cosmetics, but a share price of $1.04 looks better to many observers than a share price of $0.52.

It doesn't go that smoothly for everybody. As the proxy materials warn, the reduction in the number of shares will increase the number of shareholders who hold less than a “round lot,” or 100 shares. Typically, the transaction costs to shareholders selling “odd lots” are higher on a per share basis, so somebody is going to get hosed for this cosmetic improvement.

And it still sounds like a strange expression.