Act Teleconferencing Inc (fka ACTT)

[1manband]

Yes, this was a complicated series of transactions, and is not like any other I have seen, either. The huge annual increase in the value of the preferred stock was a new one to me, too.

"However simply deregistering a stock does not make it a private company -- it simply means that the company is no longer required to file periodic reports with the SEC like most PK stocks."

Not true. By definition, what ACTT did is a "going private" transaction.

http://www.sec.gov/answers/gopriv.htm

"A publicly held company generally means a company that has a class of securities that is registered with the Commission because those securities are widely held or traded on a national securities exchange. When a public company is eligible to deregister a class of its equity securities, either because those securities are no longer widely held or because they are delisted from an exchange, this is known as “going private.”"

ACTT was beginning to struggle - the paid teleconferencing business was falling off. Quickly. They needed a cash infusion fast, and the only way they could get it was through a complicated preferred stock transaction which completely shut out the common shareholders. In order to go private, the investor group needed to get the number of shareholders under 300 in order to deregister which also served the purpose of allowing the common shareholders an opportunity to sell their shares before they became worthless. The investor group acquired just over 50% of the voting common because they Colorado law does not allow convertible holders to vote. Those common holders that did not heed the warnings and read the SEC filings about what was to happen got caught holding he bag and lost out.

The preferred shares controlled the Company through the unusual terms of the stock. They were convertible into common shares, but the primary clause was that the liquidating dividends. The preferred shareholders received a 9.55% increase in the value of their preferred shares every quarter forever. That liquidating preference ensured the common shareholders would never receive anything from the company. If they continued to operate, the preferred holders could pay themselves a portion of the liquidating amount due as a dividends whenever they wanted. And, in a takeover or sale, they would be due the entire amount paid. In this case, we know they paid themselves some dividends several years ago, which means the liquidation preference at the time of the takeover was somewhere between $150-200 million.

Once ACTT went private, the common stock was completely worthless.