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Interesting 13D filed; Sellers selling entire 31% holdings for $1.05/share in private transaction, date ties deal to recent financing and SNL show. Finally someone at PRXI knows how to get things done.
Concerned that the stock price is being propped up by a single large (20%+) holder and company execution/revenues keep being delayed. What if the backer loses patience or simply scales back into year-end tax season?
Interesting movements (and results) with BCYP from Merriman recently. Wonder what's up?
First this...
On September 9, 2014, the Reporting Person sent the following e-mail to Bill Ogle, Chief Executive Officer of the Company:
"I have been apprised today of an $85,000 cash bonus that you were paid in addition to your salary which is wildly disproportionate for the circumstances at BCYP [the Company]. All of this in addition to an approximately 10 million share option grant.
You and the board have failed in your responsibilities to your shareholders. I want you to submit your resignation to the board of directors immediately given your failure to appropriately exercise fiduciary responsibility on behalf of the shareholders.
We will pursue whatever legal action is necessary with respect to your conduct and the conduct of the directors. This letter is being sent to legal counsel.
Ronald Chez"
The Reporting Person continues to believe in the value of the Company’s intellectual property portfolio and its potential ability to monetize that portfolio and obtain customers for its products. However, the Reporting Person believes that the current CEO and board have failed to monetize what appears to be a very undervalued asset, and that the compensation decisions that have been made regarding the CEO of the Company by board members designated by him have been egregious and at the CEO’s personal interest at the expense of the Company.
The Reporting Person intends to further pursue the matters described in the e-mail above (including the immediate removal of the CEO and the directors that he designated). He has recently discussed these matters and the future operating plans of the Company with significant shareholders of the Company, and intends to continue to have such discussions.
http://www.sec.gov/Archives/edgar/data/942801/000119312514337824/d787510dsc13da.htm
Then this...
Exhibit A
SETTLEMENT AND STANDSTILL AGREEMENT
This SETTLEMENT AND STANDSTILL AGREEMENT, dated as of September 26, 2014 (this “Agreement”), is entered into by and between Blue Calypso, Inc., a Delaware corporation (the “Company”), on the one hand, and Ronald L. Chez and Individual Retirement Accounts for the benefit of Ronald L. Chez. (together, the “Chez Parties”), on the other hand. The Company and the Chez Parties, are collectively referred to as the “Parties” and each a “Party”.
WHEREAS, the Chez Parties beneficially own an aggregate of 17,586,361 shares of Common Stock, par value of $0.0001, of the Company, constituting approximately 7.8% of the Company’s outstanding shares (the “Chez Held Shares”); and
WHEREAS, the Chez Parties filed Amendment No. 3 to Schedule 13D on September 10, 2014 with the Securities and Exchange Commission (the “SEC”) wherein the Chez Parties expressed their displeasure with a bonus that was paid to the Company’s Chief Executive Officer; and
WHEREAS, the Parties have determined that the best interests of the Parties and the stockholders of the Company would be served by avoiding further expense and disruption that could result from a prolonged dispute with the Chez Parties; and
WHEREAS, the Parties intend to provide hereby, for among other matters, the full support from the Chez Parties for the executive officers and directors of the Company; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereto hereby agree as follows:
SECTION 1. REPRESENTATIONS.
(a) Representations and Warranties of the Company. The Company hereby represents and warrants to the Chez Parties that this Agreement has been duly authorized, executed and delivered by the Company, and is a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms.
(b) Representations and Warranties of the Chez Parties. Each of the Chez Parties hereby represents and warrants to the Company that:
(1) this Agreement has been duly authorized, executed and delivered by each of the Chez Parties, and is a valid and binding obligation of each of the Chez Parties, enforceable against each of the Chez Parties in accordance with its terms; and
(2) except for the Chez Held Shares, which are beneficially owned solely by the Chez Parties as indicated in their Schedule 13D filed with the SEC, as amended, no Affiliate or Associate (as such terms are hereinafter defined) of any of the Chez Parties (other than the Chez Family Foundation, which currently holds 526,000 shares) may be deemed the “beneficial owner” (as such term is hereinafter defined) of any shares of the Common Stock, par value $0.0001, of the Company (including any direct or indirect rights, options or agreements to acquire Common Stock of the Company) or has any rights, options or agreements to acquire or vote, any other Common Stock of the Company; and
(3) in entering into this Agreement with the Company, the Chez Parties are acting solely on behalf of the Chez Parties and not in concert with any others, as a 13D Group (as defined below).
SECTION 2. ACTIONS BY THE COMPANY.
(a) Temporary Reduction in Compensation of Chief Executive Officer.
(1) The Company shall cause the annual base salary of the Company’s Chief Executive Officer to be reduced to $200,000 for a period of twelve (12) months following the date hereof. Following the twelve (12) month anniversary of the date hereof, the compensation committee of the board of directors of the Company shall review the compensation of the Company’s Chief Executive Officer to determine if any adjustment in compensation is then warranted based on the Company’s performance at that time as determined in the sole discretion of the Compensation Committee of the Company’s Board of Directors.
(2) The Company’s Chief Executive Officer shall forfeit options to purchase 750,000 shares of the Company’s Common Stock, which were granted to him in March 2014 (the “March 14 Option Grant”). The Company and its Chief Executive Officer hereby agree to enter into revised documentation with respect to the March 14 Option Grant within thirty (30) days of the date of this Agreement.
(3) The Company’s Chief Executive Officer shall, purchase $85,000 worth of Common Stock of the Company at prices not to exceed $0.175 per share within twelve (12) months following the date hereof, provided that he shall make at least $15,000 of those purchases in the period commencing on the first day after the date of this Agreement that the Company’s Chief Executive Officer is permitted under applicable law, and under applicable Company policies, including but not limited to the Company’s Insider Trading and Public Communications Policy, to make open market purchases of the Company’s Common Stock and ending on December 15, 2014.
(b) Temporary Reduction in Compensation of Chief Technology Officer.
(1) The Company shall cause the annual base salary of the Company’s Chief Technology Officer to be reduced to $137,500 for a period of twelve (12) months following the date hereof. Following the twelve (12) month anniversary of the date hereof, the compensation committee of the board of directors of the Company shall review the compensation of the Company’s Chief Technology Officer to determine if any adjustment in compensation is then warranted based on the Company’s performance at that time as determined in the sole discretion of the Compensation Committee of the Company’s Board of Directors.
SECTION 3. STANDSTILL.
(a) The Chez Parties agree that, for a period of twelve (12) months following the date hereof, the Chez Parties will not join a 13D Group (other than a group consisting solely of the Chez Parties and their Affiliates and Associates) or other group, or otherwise act in concert with any third Person for the purpose of acquiring, holding, voting or disposing of Voting Securities.
(b) The Chez Parties agree that, for a period of twelve (12) months following the date hereof, the Chez Parties, individually or in concert with others acting as a 13D Group will not (1) make or in any way participate in the “solicitation” of “proxies” (as such terms are used in the rules and regulations of the SEC) with respect to any Voting Securities, (2) propose any stockholder resolutions under Rule 14a-8 of the Securities Exchange Act of 1934, as amended, (3) seek to call a meeting of stockholders of the Company, (4) seek to take any action by the written consent of the stockholders of the Company, or (5) seek to advise or influence any other Person with respect to the voting of the Voting Securities.
(c) The Chez Parties agree that, for a period of twelve (12) months following the date hereof, the Chez Parties, individually or in concert with others acting as a 13D Group will not deposit any Voting Securities in a voting trust or, except as otherwise provided or contemplated herein, subject any Voting Securities to any arrangement or agreement with any Person with respect to the voting of such Voting Securities.
(d) The Chez Parties agree that, for a period of twelve (12) months following the date hereof, the Chez Parties, individually or in concert with others acting as a 13D Group will not otherwise act, alone or in concert with others, without the prior written consent of the Company, to effect to seek offer or propose (whether publicly or otherwise) to effect control of the management, board of directors (including the removal of any director) or policies of the Company.
(e) The Chez Parties agree that, for a period of twelve (12) months following the date hereof, they will not issue any communication or make any written statement, including but not limited to in a Schedule 13D or press release or otherwise that disparages or criticizes the Company. This includes making any disparaging communications or statements about the Company or any of the Release Group Members (as defined herein).
(f) The Chez Parties and the Company agree that the foregoing paragraphs (a) through (e) shall not prohibit the Chez Parties, individually or in concert with others acting as a “group” as defined under Section 13(d) of the Exchange Act, or any of the Chez Parties’ principals, directors, stockholders, members, general partners and affiliates, from (i) taking any other action with respect to the Company or any Voting Securities of the Company held by the Chez Parties or (ii) from taking any action (including, without limitation, those described in the foregoing paragraphs (a) through (e)) should the Company not comply with Section 2 of this Agreement, or if the Chez Parties reasonably believe that it is acting in the best interests of the Company’s shareholders.
http://www.sec.gov/Archives/edgar/data/942801/000119312514355974/d797550dsc13da.htm
Yes, ROX is better but all are speculative since the stock prices probably are more influenced by unpredictable actions of large owners than by performance of the underlying businesses. It's a shame as especially ROX seems to have promise.
ROX and IDI both are down 22% in April although their charts are different; ROX is better but both hit highs on relatively huge buys before fast fades on comparatively lower volume and no news (and no insider filings yet). By comparison, ultra-low-float COCP is down 37% even after a high-volume 6% rally on puff news today.
Take Frost followers out of the equation and which of the three businesses appears to be imminent in delivering bottom line results (ROX)? Take that one step further to see where the largest Frost investment lies with a hand-picked CEO at the helm after an admittedly very disturbing education into China (IDI).
So the bet on ROX and the double-down on IDI both are hugely speculative plays on a single control individual whose motivations we cannot know. Follow the money?
Other Frost stock IDI also down big in April with no filings so maybe not ROX business-specific but fundings/financing (structural) instead?
PAL - Wednesday's Seeking Alpha article reminded everyone of BAM's SOP attempt to tank it and take it.
seekingalpha.com/article/2011061-north-american-palladium-ltd-a-financial-death-spiral-in-process
Yesterday around this time (2PM Eastern) the AeroGarden was supposed to be on the CBS show "The Talk" but it's difficult to speculate why that would result in a $2M pop 24 hours later unless combined with a pump aimed to take advantage of the low float.
NOLs will be the story here.
Hi tweiss, thanks for the informed opinion, keep it coming. Where is the value you see that causes you to be long? LOL 345,600 holding the ask now; subtle.
FREE be careful, over 14M diluting shares issued to Hanover this year alone (adjusting for the Feb 1:10 R/S).
ALSK looks like more than the FCC decision was built into the $3+ price. Still...a major near-term positive for ALSK in completing the wireless combination. With quite a run on fully 25% of the float traded in just the past three days, where does this level out before the next catalyst of a possible dividend announcement? Also earnings next week.
ALSK big pop, will be more of a drop unless news comes out soon.
interloper / ALSK - then maybe watch for the selling to dry up and buy back in? The FCC decision still hasn't been PRd by either company. Why? Only question is whether whatever additional news to come over and above the imminent surge in cash-flow from the tie-up arrangement already is built-in at $3/share...
It can only be good news when major holders and insiders -- even dismissed executives and jilted noteholders -- are willing to put more money into the company, and the continued emphasis on equity represents a rare opportunity for retail to follow alongside those who know and evaluate the profit potential of what is going on. The public raise was a known event on the horizon so the dilution was expected, and even though the number of shares offered may be more than anticipated at these low levels (I bet it rises ahead of the offering) the larger outstanding will provide greater liquidity for big money to trade in size. Its great that the rights offering comes first both to buy time and give existing shareholders preference before the price starts to creep up.
Maybe all these options were opportunistically granted at the lows just before liftoff.
It remains a big positive that there have been no sales of stock by anyone in the know since the drop. In fact, it appears that large holders still want to maintain or even increase their equity positions. Buffalo (Avery et al) is taking payment in shares and keeping active its warrant to purchase 5 percent of the company, while everyone else seems to think it a good deal to provide at least the immediate additional funding needed at just a fraction of the price paid by the initial investors and participants in the two public raises, not to mention the price to which Apollo was committed. The timing is off, though, with the first $5M funding to have closed no later than next Wednesday, so obviously this remains a risky work in progress.
Still nice to see a focus on equity. PGRX likely has to stay in the public market for continued access to the capital needed for development of the mine (or a buyout) in time to meet the off-take obligations to the Chinese, so this could be a rare opportunity for the honest little guy to ride along with the big boys.
yay, a born-today basher, we must be on our way
IMHO the timing of events was laid out in the extension agreement filed April 17:
5.4 Failure of Parent Fund Raising. Prospect Nevada shall have failed, for any reason, to have closed Equity Issuances or Approved Subordinated Debt raises from which it shall have received cash proceeds in the following amounts by the following dates:
(a) No later than May 15, 2013: Five Million Dollars ($5,000,000), of which all or any portion may be raised as Approved Subordinated Debt (the “First Funding Raise”);
(b) No later than June 17, 2013: an additional Seven Million Dollars ($7,000,000), of which all or any portion may be raised as Approved Subordinated Debt (the “Second Funding Raise”);
(c) No later than September 10, 2013: an additional Eighteen Million Dollars $18,000,000), of which all or any portion may be raised as Approved Subordinated Debt (the “Third Funding Raise”); and
(d) No later than August 1, 2014: an additional Twenty-Five Million ($25,000,000), of which no more than Fifteen Million Dollars ($15,000,000) may be raised as Approved Subordinated Debt (the “Fourth Funding Raise,” and collectively with the First Funding Raise, the Second Funding Raise, and the Third Funding Raise, the “Funding Raises”).
http://www.sec.gov/Archives/edgar/data/1477032/000110465913029953/a13-7394_4ex10d2.htm
Reading further, dilution from equity raises is unlikely -- though not impossible -- at current prices as "approved subordinated debt" appears to be the avenue we are headed down. (BTW, after the common pop, take out your gain to purchase the preferred and leave the remaining free shares to enjoy any further upside in common). With such a low float, ridiculously uncomplicated structure, and few (only two really, AWP and Karlsson) totally aligned interests, I am content to ride this out right down to the wire even though especially in these most heartless times equity usually is deprived of even the barest scraps.
Anyway, the above filing is what I have been using as a roadmap to the company's intentions and timetable, with the assumption that the extension itself let alone such documented (and nearby!) milestones couldn't and wouldn't have been possible unless the anticipated funding already was all but in the bag. Of course, "all but" is the risk here...
I'm not on Twitter but it's exactly as finbar99 said earlier; IF enough of the objecting noteholders now have been bought off then equity is toast unless whomever purchased all those shares last week makes some play to wrest the estate away from the DIP with enough cash to pay off all debts and still have something left for over for shareholders. Stranger things have happened but I've not seen it.
However, over three weeks until voting on May 20 (if that date holds) is a long time in BK for a little and uncomplicated business that is ripe for the taking, so anything can happen if there is someone who wants it enough.
The other general unsecured creditors primarily are employees and landlords who might have a paycheck or rent due from one of the SCHSQ companies. Creditors are owed money by the company, stockholders are owners to whom everything left over belongs after all debts are discharged. Remember how you are supposed to pay all your debts before you start spending on yourself? Equity interests are not, and never will be, in any way, shape, or form, creditor claims, so there is no value for equity unless and until all creditor claims are satisfied in full.
When SCHSQ abandoned the auction option in favor of reorganization as a going concern, the Ad Hoc DIP Lenders publicly acknowledged (probably very reluctantly, which is why so last minute) that SCHSQ has a much higher value intact and ongoing as opposed to broken apart or totally liquidated. This is true because significant value exists in SCHSQ's long-established relationships with both customers and vendors which allow SCHSQ to completely dominate the school supply business with a 70 percent market share and zero real competition. What??!!! It also is true because the debt becomes more manageable when it is not accelerated (all due immediately) and instead might be so very easily refinanced at current all-time-low rates.
However, it is hugely difficult for equity to win BK court acceptance of the true present value of the going concern. In a sale the cash proceeds would be applied against the documented debt without much -- some, such as the make whole, but not much -- room for shenanigans. In a restructuring, where the debtor has possession of the company and controls the BK process, assets will be minimized and debts will be inflated in order to demonstrate to the court the worst possible case (from the current stockholders' equity position).
Imagine that you are 10 years into a 30 year mortgage when suddenly the bank sends you a bill stating that the remaining balance is due immediately. Then imagine that the amount calculated by the bank is massively inflated to include 20 years of interest that would have been owed if payments had continued monthly but that shouldn't be included if the loan is retired early. Then imagine that the bank justifies the call by stating the value of your house is a fraction of true value, and that is what violated the terms of your leverage and allowed the call in the first place. Then imagine that it wasn't real property like a house whose value could be appraised, but a collection of intangibles such as a network of suppliers, or a hard-won customer list, or years of dependable performance, or a sterling reputation, or a nationwide business model that is difficult to replicate (hence the virtuous cycle of economies of scale methodically eliminating what little competition remains), that constituted your largest asset. Finally, imagine that you are up against a billion-dollar money-center bank that does this by computer every day to successfully dispute all of these allegations in court within a short period of time.
The analogy isn't exact but it is close, and if I'm a hedge fund sitting on a huge pile of cash and I see such a predictable and reliable business with such a deep moat, insane cash flow, apple-pie management, and ridiculously-dependable margins of 35-40 percent(!!) even in the depths of 1930's-type economic conditions (pent-up demand now anyone? Hurricane Sandy rebuilding?), I'm going to Wall Street them so fast and furious that the old-school 1980's LBOs and S&L/MBS crisis look like amateur hour in comparison. In fact, it would be unAmerican NOT to professionally optimize and preserve such a perfectly installed base that works so well and is effectively impossible to replicate.
Still, you think you will be allowed to participate? You think over $1.5 million to double -- then halve -- the public share price couldn't be a chump-change head-fake for reasons you can't figure? You think there is ANY desire to retain expensive, transparent, and hugely annoying public reporting requirements as opposed to a standard take-private strip-and-IPO?
Trinity Church already was 100 years old when the Buttonwood Agreement was signed, but Wall Street never has been associated with altruistic treatment of any kind. Charity begins and ends at the old church at the top of Wall Street; it is non-existent as you proceed down the hill.
The risk/reward IS large here, and that is retail's greatest danger and hope. Like a flea on an elephant or a mangy dog under the master's banquet table, public payoff on BK plays is completely dependent upon luck and annoyance since scraps generally are provided to current stockholders only if the amount is relatively insignificant and/or the effort to exclude retail is not worth pursuing. By their very nature, the vultures retail is up against in any BK must win every last scrap in order for their fight to be worthwhile; the easy value already was gone long before the BK filing. For recent proof and instruction look no further than RDDY and LNET; for full-on understanding Google Washington Mutual.
Don't misunderstand, I'm in at 17¢/share but at least I know this is a long-shot gamble where logic and fairness don't count at all.
The matters scheduled to be heard tomorrow can be found in the most recent agenda which is filed here:
http://www.kccllc.net/documents/1310125/1310125130419000000000008.pdf
The main item will be the court's ruling (approval, rejection, or continuance) on the debtor's disclosure statement. The disclosure statement is the document by which the debtor provides information about the current financial status of the company. Creditors, stockholders, and other interested parties use the information in the disclosure statement as a basis for voting on whether to accept or reject the debtor's plan of reorganization (POR). The debtor's POR is basically the meat of the BK process; court confirmation of the POR dictates how everybody's interests in the BK estate are going to be handled (leases cancelled, debts forgiven, loans cut, equity eliminated), and how the company will be structured upon emergence from BK.
SCHSQ's most recent POR is filed here:
http://www.kccllc.net/documents/1310125/1310125130419000000000007.pdf
Usually the disclosure statement is contested as not factual, correct, and/or complete. Any properly-filed objection by a legitimate party to the proceeding gets to be heard before the court rules on the motion to accept the disclosure statement. Voting on the POR (the main event in BK) generally cannot occur without an approved disclosure statement.
In this particular case the debtors continue to "revise" (radically change, actually) the POR, and therefore the disclosure statement, even on the eve of the hearing. Consequently, the obvious objection has been filed that it is unreasonable (impossible really) to have a legal proceeding on the adequacy of a disclosure statement (and underlying POR) that remains in flux.
Since this seems like a no-brainer (even though there is no such thing when lawyers are involved) it may be likely that the motion to accept the disclosure statement is not granted at tomorrow's hearing. This would be the second time that the debtors (first Bayside now the Ad Hoc DIP Lenders) tried to quickly snatch the entire business before anyone else had time to realize or understand what was going on. Remember that the court only rules on motions and issues that are correctly introduced by parties with standing. If the timeframe is accelerated and/or information disclosure is lacking yet no-one notices or properly objects, the court will support all manner of sins.
Even if all the rules are followed the process still is subject to a level of officially tolerated manipulation that makes the best OTCBB and Pinksheet stock scams look like the penny-ante promotions that they are. BK is the big leagues and Delaware is center court where millions -- even billions -- of dollars in equity are legally, shamelessly, and with full transparency, stolen from the owners who earned it and awarded to lenders and lawyers who show up only after there is blood in the water. Remember that the U.S. bond market is about TWICE the size of the U.S. stock market.
So the hearing on the disclosure statement is still a bracket event; confirmation of the POR is the final contest for all the marbles. In SCHSQ, as in most BK, stockholders can't even vote on whether to accept or reject the plan that gives away the going concern. This is because any POR that cancels equity assumes stockholders will vote to reject, so the POR is structured to ensure that stockholders are outvoted by everyone else.
This is most easily accomplished by dramatically understating the equity in the BK estate so that current shares are cancelled and creditors accept in lieu of full payment new shares that are found to have surprising value only after the company emerges. Unless there is a large stockholder such as a pension fund that the debtor fails to cut in on the deal, current stockholders usually lack the knowledge, time, or money to successfully challenge the debtor's valuation of the estate, especially since the debtor holds all the cards (information on assets, financial position, upcoming events, etc) and is in control of company decisions.
However, if the debtor's valuation can be successfully challenged to show additional equity then the POR must be revised to indicate how that additional equity will be distributed. To the extent that enough additional equity is found that current stockholders might receive a distribution, current shares would have value and probably even survive to participate in any upside after the restructured company emerges. To the almost-unprecedented event that equity is found to exceed debt (throwing the entire BK filing into question), the board of director's fiduciary duties would revert back to equity.
Since everything is frozen at the time of a filing (permission usually is granted to conduct business as usual but not much else during the process), a BK company cannot issue additional shares or debt. As a consequence you would think that trading activity in a BK company's stocks/bonds/claims might represent knowledgeable jockeying for position in the line for payoff. This is not always the case, and it is almost never the case in Q stocks. It's true that BK provides an excuse for volatility, especially in low-floaters, that can be profitable to nimble and disciplined traders, but don't confuse the market action as having anything more than a passing connection to the courthouse drama. If you must look for reliable clues the market price of traded debt is the best indicator but in the case of SCHSQ none is available.
I think you're mostly right, especially since the recent filings appear to indicate adversity between the AdHoc DIP Lenders now taking the Bayside path and the Official Committee of Unsecured Creditors feeling left out in the cold.
Interestingly, the Committee seems to advocate most strongly for the Trade Creditors even though Holders of the 2011 Debentures represent by far the single largest group that is impaired (besides equity). Could it be that the noteholders might be satisfied with the crumb of new equity offered in the restructured company? Why have they been silent as the stock has gone from $15 to $0.09 in the two years since they accepted the convertible exchange? It is surprisingly difficult to discover who holds those notes but they would seem to be the closest natural ally to equity.
STOCKHOLDERS ARE NOT UNSECURED CREDITORS! Creditors are owed a debt by the company, maybe for money lent (banks and bondholders), or goods/services provided (vendors), or work performed (employees). Stockholders own a defined share in the equity of the company, either the net profits of a going concern or the surplus of assets over liabilities in a liquidation. For a BK this is THE critical distinction, since a filing immediately shifts the board of director's fiduciary duty from equity (stockholders) to debt (creditors).
Secured creditors have a claim backed by a specifically identified asset that may be seized in the event of default; for example, real estate and automobiles that generally are pledged against mortgage and auto loans.
Unsecured creditors have a claim based on performance but without automatic repo recourse; for example, credit card charges and other signature borrowings (or work/goods/services) obtained in exchange for only a promise to pay.
Stockholders hold an ownership interest (share) in whatever is left after all creditor claims are satisfied; either the net profits of a going concern or the surplus of assets over liabilities in a liquidation.
In SCHSQ, unsecured creditors are impaired in both the initial and revised PORs, so of course the Official Committee of Unsecured Creditors objects to both plans. BUT THAT COMMITTEE WILL FIGHT ONLY FOR PAYMENTS THAT MAKE UNSECURED CREDITORS WHOLE; they will NOT exceed that amount to prove that additional value exists for equity.
In order to protect stockholders' interests an Equity Committee is needed, which is exactly what the fast-tracking of this process is designed to avoid. As in every U.S. court, the BK judge is impartial and can't rule or order on any consideration or motion that isn't properly entered. Without anyone to offer the obvious objections that guard against blatant distortions (including the DIP board of directors who in a BK works for creditors not owners), all unclaimed equity value is so easily stolen away. Absent an Equity Committee, individual stockholders (even holders of just a single share) may file an objection with the court prior to the deadline to obtain an argument and ruling on a particular issue. Any communication, but especially an old-school letter, counts so long as it is received at the court before the deadline.
The secured creditors are both represented and protected by their security interests; they are getting 100% of what they are owed. The unsecured creditors are represented by a committee which continues to challenge the BK estate's contention that only a max 10% recovery is available on allowed claims, but that committee will cease its efforts at 100% recovery for unsecured, which still leaves equity (stock) worthless.
If no-one is looking out for stockholders' interests, neither logic nor math will be sufficient to legally demonstrate any equity value in the company under any circumstances, either as a going concern or a winding-up.
Today's filings indicate a setback for stockholders since the auction option represented the cleanest means to demonstrate that value exceeded debt. Even there, though, stockholders faced a high risk of being stiffed as Wall Street buyers dismantled the company by bidding up the prized subs to top dollar while arranging for all the corporate debt to be dumped disproportionately into the unwanted dregs left for (consequently negative-equity) stockholders.
HOWEVER, the market action remains stockholders' truest and only hope. While currently standing alone against all odds, it is incredibly significant that (1) unsecured bondholders very quickly ponied up $155M in DIP financing to take out Bayside's blocking position and transparent loan-to-own "rescue," and (2) the unusual trading activity coincident with recent movement in the BK case resulted in a massive intake of shares even though equity is deemed impaired and assumed to reject the POR (if buying shares isn't buying votes then shares probably have some other value higher than the purchase amount).
Follow the money but not with more than you can afford to lose because the game is so completely rigged against the little guy. That's why I like low floats; sometimes it is more efficient to just pay off retail and emerge quickly than to fight for every last dime...unless you are lucky enough to find (or intimidating enough to create) an opportunity where no-one is willing to fight for every last dime.
Once you file BK you're caught in the process, and the vultures who live there rarely let you out without picking the carcass clean no matter how rich their meal.
Follow the money, not the filings. Still huge risk here as shareholders (who generally are not included as stakeholders unless represented by an equity committee) usually are not allowed to share in post-BK payoffs.
I agree that the action late last week and the significant financing to take out Bayside's loan-to-own are two very compelling arguments to buy the stock (I personally like the low float as well but that can cut both ways). However, retail does tend to get royally done over when the maneuvering in these BK plays is settled so never bet what you can't afford to lose.
The worry is that a large holder used the volume generated by the news to lighten up their holdings. Shouldn't be able to trade on inside information and I still don't see any downside here, just maybe some repositioning like the BlackRock reclassification, but you never know.
After the two capital raises last year, and with the other restrictions and control concerns tied up in the complex financing and holding structures, I don't that PGRX is diluting right now.
Won't have to wait years; few weeks or months should do it.
Also Wallace's seperation terms have been filed and they are even more harsh than Avery's -- no severance, lost half his stock options, remains collared to PGRX CEO as parole officer indefinately without compensation -- all terms that were "voluntarily" accepted in exchange for what must be quite valuable mutual indemnification. In an odd request, Wallace was able to keep his company iPhone so long as he promised to pay all associated charges. How far the mighty have fallen.
Were Avery and Wallace so eager to avoid jail or just attempting to save their reputations (and court costs)? What could they have done to experience such a quick and complete reversal?
HokieHead vs Basketball14? Odds and anyone's actual BK experience greatly favor Basketball14 being right; however, HokieHead offers some compelling facts to question the obvious.
By Hokie's count, $1.5M has been "invested" in SCHSQ this past week alone, and since that represents well over 1/3 of the issued (and slightly more of the float), it certainly seems like someone is accumulating with the expectation that shares are undervalued.
However, in the greater scheme $1.5M remains chump change in pennyland. So does this represent the load-up for a P&D of this relatively low-float issue, or does it represent bidder maneuvering ahead of the upcoming auction possibility? Either way suggests a $1.5M conviction (and greater than 2-1 buy-sell ratio) of higher payout ahead, (hopefully in the form of increased share prices as opposed to insider deals).
The biggest other possibility -- that the recent buying is to obtain votes in the upcoming restructuring option -- seems unlikely since equity is deemed impaired in the current plan and unable to vote on the POR.
Even so, the odds of big money corruption and the unknown (to us) keep the deck massively stacked against the poor retail shareholder. Big risk/big reward.
It seems like management is hoping and preparing for the restructuring option over the auction, not that they have complete control over the matter. You're right though, there is equity value here no matter what, it just remains to be seen whether shareholders will be allowed to realize it or will have it stolen out from under them.
I agree, somebody's running this up, question is why? Posters here don't seem to realize today's hearing was cancelled yesterday and the adequacy of the disclosure statement isn't scheduled until April 22. As just stated, a more likely reason is movement on the Make Whole issue that saw some action Tuesday. Or just simple penny manipulation.
We know that Karlsson worked with -- and walked away from -- the only other player in Holbrook before approaching Prospect, and we also know that Karlsson and Prospect already created American West which binds their mutual interests together. So baring the unexpected hostile arrival of some big new interest, I agree it is just a matter of time for PGRX to get back on track.
Also today Wallace finally speaks up on his sudden departure:
“I had another opportunity come up that I really wanted to take advantage of,” Wallace told The Tribune-News. “My leaving had nothing to do with the payment to The Karlsson Group.”
http://www.azjournal.com/2013/04/10/global-resources-misses-payment-to-the-karlsson-group/
I bet his leaving had everything to do with the Apollo deal though. Still no disclosure on the terms of his separation.
BlackRock didn't dump their shares, they shifted the entire holding into a subsidiary. On the day they did that (March 28) the stock jumped from $0.25 to $0.29 and hasn't looked back since.
I'm pretty sure "The Karlsson Group" is just one guy (maybe one partner too) who happened to make a timely purchase of a nondescript parcel of land in order to recover and market any petrified wood it might contain, only to have the Arizona Geological Survey come along a few years later and publish a study reminding the world that the land sits on top of one of the largest potash deposits in North America. Karlsson already has sold the land to PGRX for 10x (100x?) more than he paid just 10 years ago. Since he has received a significant amount in cash from PGRX already and has a royalty interest in the developed mine, I think Karlsson is fine with waiting for the deal to be done right.
Also still not a single insider or institutional sale of stock even as the entire float has traded in the one month since management's sudden (and continuing) upheaval. BlackRock is holding 5.7M shares at way above $2.00, not to mention the two underwritten raises of 15M shares @$2.50 last July and another 15M shares @$1.75 in November. It seems that even Avery and Wallace have retained their 1.5M shares (Avery) in addition to 1.4M underwater options at $2.60-$4.25.
I don't think that these actions are secret, just that there are material discussions taking place that preclude anything more than the minimum disclosures required. Talks with Karlsson in LA probably aren't difficult but maybe a renegotiation of the off-take agreement is occurring as well, since the timing that mandated for production/delivery always was a little close. The Chinese already have used the signed agreement to obtain lower prices from Canada so they don't necessarily need a quickly-producing mine to benefit, but no doubt any delay opens up new negotiations of all terms, particularly price and maybe even the structure of the entire deal to include the purchase of a partial interest or outright buyout of the company (unlikely though since China has had difficulty owning U.S. resources).
Point being that the note, mine development, and project financing all are interdependent so none will be resolved until the terms of each are settled. Since the debt is secured by the asset and held by an interested party/partner (not bank debt), I'm hopeful that all the moving pieces ultimately will fall into place in such a manner that current equity will share in the mutual rewards.
It also will be illuminating to learn the payments, if any, that PGRX has agreed to in connection with Wallace's resignation. Avery's terms were filed four days after the event, which suggests we must wait through the weekend for a Monday disclosure to compare against Wallace's 6/13/12 Employment Agreement for further clues to what is happening behind the scenes.