Author Topic: Can a stock do this?  (Read 2136 times)

leighb

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Can a stock do this?
« on: December 11, 2019, 09:00:36 AM »
Hi All,

I inherited an interesting portfolio of penny stocks. I've done my best to move them into more traditional securities. My question is about a particular penny stock CLSI. They make the Denver boot. I'm not looking for advice on what I should do. I've sold the shares I could.

History: About 15 years ago it wanted to go private. Being a public company wasn't working out I guess. The shareholders did not cooperate. I think this was because they were not going to get a fair deal on their shares. Anyway the stock stopped filing and went dark. They continued to buy back shares in this period. And the share price continued to fall.

Now: The company sold its ticker to someone about 2 months ago. And by sold, maybe gave it away, its a little unclear. They decreased their shares outstanding. Who it was sold to know one knows. They released a bunch of unaudited filings. There's still a stop sign on OTC. So now they are a private company with all of their assets and patents. And some mystery company owns the ticker symbol.

Now in my eyes they just found a way to go private without compensating the shareholders. Other people are incredibly excited about these actions, but I can only assume that they are pumping the stock. Here's my question can a company just throw up its hands and say "here's our shares back, we don't want to be public anymore. Oh and by the way we are keeping the assets." What if a bigger company did something like this. Apple says, here's our ticker symbol... bye. 

secondcor521

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Re: Can a stock do this?
« Reply #1 on: December 11, 2019, 08:33:18 PM »
The company can make an offer to purchase any shares held by the public pretty much at any time and at any price that their board of directors thinks is reasonable.

The people who own those shares can either accept or decline the offer as they see fit.

In order for a company to be listed on an exchange, there are listing requirements having to do with a minimum number of shares outstanding and a minimum share price.  If a company does not meet those requirements, then the stock will be delisted from the exchange.  Maybe there are similar requirements for OTC markets, but I don't really know.

If a company is no longer traded, then those shares still held by the public are still held by the public, and those public owners still have all of their shareholder rights (such as voting rights and rights to receive dividends).  Essentially they would be shareholders in a privately held company.

Shares in a privately held company can be bought and sold but I think that is harder to do (I think there are actually rules that are in place to help ensure that these transactions are "fair").

If a company is privately held, I don't think they're subject to the SEC regulations regarding releasing financial statements.  But they can obviously release unaudited statements if they want to (as long as they're not misleading).

I don't think ticker symbols are "owned", per se.  At least not on the exchanges.  As far as I know, when a company goes public or does a stock spin-off, they can "claim" any ticker they want if it's available.  I thought that's what happened when HWP spunoff A.  I was surprised "A" was an available ticker symbol, but it was.  Maybe rules are different for OTC stocks.

All of this may not be palatable to the shareholders that didn't want to sell at the offered price, but it was probably disclosed at the time that the company wanted to go private, so the risk that the stock would be delisted should have been a consideration.  The only way to prevent a company from going private would be to buy enough of the stock to gain control of the board of directors, and most people can't afford to buy that much of a company.  In the case of AAPL, it would be hundreds of billions of dollars.
« Last Edit: December 11, 2019, 08:35:11 PM by secondcor521 »

jim555

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Re: Can a stock do this?
« Reply #2 on: December 11, 2019, 10:48:45 PM »
It sounds like the company did a reverse split to reduce the number of shares and bought an existing shell company to get themselves a ticker.  Then they usually recreate themselves to the flavor of the hour, like now we are a pot stock.  Lots of shady penny stock companies do this.  These companies are usually legal scams, doing just enough to stay legal.  Insiders usually hold almost all the shares so a minority shareholder can't do much besides asserting dissenters' rights when a corporate action takes place.  That involves lawyers and lawsuits and is very expensive.
« Last Edit: December 11, 2019, 11:11:26 PM by jim555 »

leighb

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Re: Can a stock do this?
« Reply #3 on: December 14, 2019, 06:04:11 PM »
So what I'm hearing is, yes.... a company can do go from public to private in this manner. Leaving the shareholders behind.

Financial.Velociraptor

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Re: Can a stock do this?
« Reply #4 on: December 15, 2019, 10:23:06 AM »
Your best bet is to see if you can find a class action suit by shareholders to join.  They tend to come out of the woodwork when a publicly traded company, no matter how small, starts acting obnoxiously; especially in the event of buyout offers.   How these suits get started is an area I don't understand.  Maybe if we have a securities attorney on the board they can shed some light.  It isn't worth filing suit on your own unless you are talking about hundreds of thousands of dollars in this position.

leighb

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Re: Can a stock do this?
« Reply #5 on: December 17, 2019, 12:23:20 PM »
I did have a ton of shares. Couple million. Which is not a lot at .002, but is a lot at .1 so I'm not complaining about my situation. I've been lucky. What I am is perplexed by the events and the questionable legality.  I know others who haven't been lucky because they could not trade their shares because they were not held electronically.

jim555

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Re: Can a stock do this?
« Reply #6 on: December 17, 2019, 03:06:09 PM »
While you can have a ton of shares getting those shares in a state that will allow them to be traded on US exchanges is involved.  Without getting listed you are limited to person to person private sales, and those shares are essentially worthless.  The link describes some of the process:
http://www.firstamericanstock.com/submission-for-initial-dtc-dtcc.html

Lucky Penny Acres

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Re: Can a stock do this?
« Reply #7 on: December 17, 2019, 11:30:33 PM »

Abandoned and un-used ticker symbols are available to get re-used by new companies that request that ticker. You don't somehow own shares in the new company just because it is using the same ticker symbol as the old company. And your shares in the old company don't just disappear even though it no longer has a ticker symbol.

If you never sold your shares in the old company and the corporation didn't legally cancel your shares (which can happen if the company goes through bankruptcy and cancels the outstanding common stock for example), then you technically still own your shares. The shares may no longer be eligible for trading on an exchange or the OTC markets so it could be hard to trade the shares. You could sell the shares in a private transaction if you can find a buyer. Try contacting the company directly (or, if you can find the information, the company's transfer agent).  The company or its transfer agent can verify that you still are registered as owning the shares. The company may be interested in purchasing your shares from you directly or may be able to refer you to someone interested in purchasing your shares. The price and terms would be individually negotiated at that point.

If held through a broker and you really just want to get rid of it, you can always declare the shares worthless so you can get them out of your account and take the tax loss.


 

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