You Should Thank Us For Taking Over Your Company. And By ‘Thank Us,’ We Mean Leave Us Alone. Thanks.

 

Can you take it all away
Can you take it all away
When you shoved it in my face
This pain you gave to me
Can you take it all away
Can you take it all away
When you shoved it in my face
-Blurry, Puddle of Mudd

Well, not all of it, but how about the ability to challenge the board of directors?

Genesis Group Holdings, Inc. has been making some big moves.  As it prepares for the future to consolidate its recent acquisitions and business plan, it has also insulated itself from its outside shareholders.

Genesis’ services include the design, engineering, construction, deployment, integration and maintenance of complex and converging wireless and wireline networks.

Since early 2011, Genesis has been issuing shares of common and preferred stock in exchange for various financing and acquisition deals, including various insider deals.  In September and November 2012, Genesis acquired a few companies for a mix of cash, notes and preferred stock.

On December 5, 2012, Genesis filed a registration statement for an IPO that doesn’t have an underwriter attached.  I guess they are just getting the ball rolling.

Even more interesting, two days later, late on a Friday, Genesis filed an information statement that notifies its outside shareholders that the Majority approved:

  • a reverse stock split;
  • a classified board;
  • the elimination of the shareholders’ ability to call special meetings;
  • the establishment of a super-majority voting for certain amendments to Genesis’ charter; and
  • the establishment of a super-majority voting for certain amendments to Genesis’ bylaws.

While the reverse stock split is not for the purpose of going private (otherwise an IPO would make no sense here), taken together the proxy statement shows that the insiders are looking to have insulated themselves from the will of the outside shareholders.  Executive officers and directors already control 28% of the vote, and three other investors (including one holder that appears to be a trust owned by the CEO) hold about 32%.

Since their stock price is far too low to qualify for a listing (about $0.02/share at this writing), why not get rid of some small shareholders as a side benefit of the reverse split, entrench the board and limit voting rights?  After all, this is what they paid for, right?

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2 Responses to You Should Thank Us For Taking Over Your Company. And By ‘Thank Us,’ We Mean Leave Us Alone. Thanks.

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