My thanks to Wavxmaster...
Below is from Wavxmaster's posting of the entire Wave RS-related filing. Thanks, Wavxmaster, for putting up the document. I have taken what I think is the most important CHUNK (it may not be the most important, but it seems to be the part where the BoD and SKS are laying out the case for RS) and I will do my selective BOLDING and formatting changes (with interlineary comments clearly marked). I am doing this because I got a couple of e-mails last night and folks wanted me to do something other than satire. (Satyrs love satire. Others don't. It is Satyrday, is it not? If there are some typing and thinking miscues, forgive me: I was out being a Satyr until about an hour ago.)
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General
The board of directors has unanimously adopted a resolution approving, subject to approval by the Company’s stockholders, the Proposed Amendments to the Company’s Restated Certificate of Incorporation, to effect a reverse stock split of the Company’s Class A Common Stock and Class B Common Stock, at the discretion of the board of directors. [/u[ Under the Proposed Amendments, each outstanding 2, 3 or 4 shares of common stock would be combined into and become one share of Common Stock. The effectiveness of one of the Proposed Amendments and the abandonment of the other Proposed Amendments, or the abandonment of all of the Proposed Amendments, will be determined by the board of directors in its discretion following the Special Meeting.
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(CM: We are basically being asked to trust the board. The board is, without really any question, a rubber-stamp for SKS. I have seen, over the years, NO indication that the board is capable of independent thought or innovation or holding anyone's feet to the coals. It doesn't even seem capable of buying more shares in this venture. Does this mean I don't trust them and/or SKS? Yeah, well, my thoughts on this are not black and white. Sorry. Wish they were. My lack of black and white puts me into the second tier of membermarks. For me, it comes down to a basic question: Are SKS' incentives and interests sufficiently and more than just partly aligned with the interests of shareholders? Given that he has not a small amount of shares--and he no doubt hopes for a big payday and LOTS OF PRESS LOVE and ADULATION and VALIDATION as a result of years of positioning for trusted computing reaching critical mass--you could say his INTERESTS are our interests. He wants share price way up. But, given the fact that he has demonstrated NO **publicly evident** interest in creating objective, realistic, real-world benchmarks for his performance--and no interest in tethering his compensation to meeting those benchmarks--and given the fact that WE (not just me) have not seen a single senior management SACRIFICE while slogging toward what we hope is ubiquity--one could make the case that, with a NICE compensation package and a rubber-stamp BoD, life doesn't suck for SKS. The nest isn't one of rocks.)
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If the Proposed Amendments are approved by stockholders and the board of directors determines to effect a reverse stock split by filing one of the Proposed Amendments with the Secretary of State of the State of Delaware, all other Proposed Amendments will be abandoned. Approval of the Proposed Amendments will authorize the board of directors in its discretion to effect a reverse stock split in any of the following ratios: 1:2, 1:3 or 1:4, or to not effect any reverse stock split. The actual timing for implementation, if any, of the reverse stock split will be determined by the board of directors. After the Special Meeting the Board may determine that it is not in the best interest of the Company and its stockholders to implement the reverse stock split, in which case the board would abandon all of the Proposed Amendments.
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(CM: There sure seem to be a lot of OUTS re: this reverse split. Isn't it the case that the BoD of a public company, in general, could pull the trigger on a reverse split without shareholder approval? I ask because I still own shares in a company that DID JUST THAT. One morning, we shareholders all woke up with one-fifth fewer shares than we had the afternoon before. Uhhh... kinda not happy about all of that. Shareprice has drifted generally down, but mostly just drifted ever since. There was no seeking out of shareholder approval. It was just done because it was deemed NECESSARY to regain compliance.)
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Purpose of the Reverse Stock Split
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(CM: Okay, so here come the arguments FOR this measure)
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The principal reason for the reverse stock split is to increase the per share trading price of the Company’s common stock which could help to ensure a share price high enough to satisfy the $1.00 per share minimum bid price requirement for continued listing on the Nasdaq National Market, although there can be no assurance that the trading price of the Company’s common stock would be maintained at such level or that we will be able to maintain the listing of our common stock on the Nasdaq National Market. On October 26, 2005 Wave received notification from The Nasdaq Stock Market indicating that for the prior 30 consecutive business days, the bid price of Wave’s common stock had closed below the minimum $1.00 per share requirement for continued inclusion under Marketplace Rule 4450(b)(4). In accordance with Marketplace Rule 4450(e)(2), Wave was provided 180 calendar days, until April 24, 2006, to regain compliance by having its shares close above $1.00 for a minimum of 10 consecutive trading days. On April 25, 2006 Wave received written notification from The Nasdaq Stock Market indicating that the Company failed to regain compliance with the $1.00 per share minimum bid requirement for continued inclusion on The Nasdaq National Market under Nasdaq Marketplace Rule 4450(b)(4).
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Under the Nasdaq rules, Wave requested an appeal hearing before the Listings Qualifications Panel (the “Panel”). At the appeal hearing, Wave presented a Plan of Compliance under which Wave would seek to regain compliance with the $1 minimum bid price requirement by effecting a reverse stock split as described in this proxy statement.
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(CM: So there really is no question that a appeals hearing has ALREADY happened, per Awk's statements. It's right here in black and white. Wave has presented a Plan of Compliance. And, obviously, the only DIRECT thing Wave could do to, as much as possible, GUARANTEE compliance was to offer up a reverse stock split. Question: if Wave had offered no Plan of Compliance and thus offered no Reverse Split, that being the only tangible thing the company could DIRECTLY do, is it not the case that the stock would have been pretty much GUARANTEED to be pushed down a market by the Panel?)
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Wave’s shares remain listed on The Nasdaq National Market pending the outcome of the appeal.
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(CM: At the risk of stating the obvious, is it not POSSIBLE that the whole point or a BIG point here is that an APPEAL has happened, an OFFER of of Reverse Split has been made because that's all that they COULD do in their current situation, and some time has been PURCHASED? And what can we reasonably expect to happen in the meantime? We certainly have every reason to expect the formalization of the NTT MOU. The Senate has passed an Iraqi war appropriation of some 90 or so BILLION DOLLARS... which frees up other Army and DoD programs which have been "locked" without funding. Uhh... Q2 comes to a close in the next couple of weeks. Maybe there is something coming on another front? Yeah, but as soon as I finish typing that, I think to myself: Isn't it a little wearying to always be waiting for The Big Pumpkin?)
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If stockholders do not approve the reverse stock split or if the board of directors decides not to effect the reverse stock split, and the trading price of the Company’s common stock does not otherwise increase to and remain greater than $1.00 per share, it is likely that Wave’s common stock will be delisted from the Nasdaq National Market.
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(CM: Truly one of the more interesting passages: "it is likely." Isn't it AUTOMATIC? What am I or we missing here? I realize that legal language is the language of the wiggle and the "if" and the "may"... but, really, isn't this as close to a slam-dunk as it ever gets? Or... is there some room for the Panel's DISCRETION in these matters? I am not trying to create false hope. I am just reading closely.)
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If the Panel denies Wave’s appeal, Wave’s common stock will be delisted from the Nasdaq National Market (even if the reverse stock split is approved and implemented before the Panel renders its decision).
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(CM: Because I have broken this excerpt out, it's harder to understand the context here. But, it seems to me that even IF Wave's stock price stays above $1, that the Panel can exercise its discretion and DENY the appeal. Okay, so now I may be accused of creating false despair.)
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If Wave’s common stock is delisted from the Nasdaq National Market, Wave would alternatively apply to have its common stock transferred to the Nasdaq Capital Market, as long as it continues to satisfy the applicable initial listing requirements for such market other than the minimum bid requirement. If such application is approved, Wave will be afforded the remainder of the Nasdaq Capital Market’s 180 calendar day compliance period (i.e. until October 21, 2006) in order to regain compliance with the $1.00 minimum bid requirement of that market.
In such event, the board of directors may implement a reverse stock split for purposes of maintaining listing on the Nasdaq Capital Market, provided that the Proposed Amendments are approved by the stockholders at the Special Meeting.
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(CM: You know, if WE approve the RS measure, a gun is being placed on a table in the second act. Given the rules of drama, it will be used. Of course, that's a little joke. Sorry for the satire. Now, we get to the good stuff...)
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The board of directors believes that the delisting of the Company’s common stock from the Nasdaq National Market, even if it were listed and traded on the Nasdaq Capital Market, would likely result in decreased liquidity, a loss of current or future coverage by certain analysts and a diminution of institutional investor interest. Also, companies trading on the Nasdaq Capital Market cannot avail themselves of federal preemption of state securities laws, also called “blue sky” laws, and such companies’ securities must generally be registered or exempt in each applicable state. The board also believes that such delisting could also cause a loss of confidence of industry partners, customers and Company employees, which could harm business and future prospects.
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(CM: The above is, I presume, their best OFFICIAL, public reasons for the proposed RS. I am not in a position, as of this morning, to assess the merit of these arguments. They would seem to have some merit... on their face).
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If the Company’s common stock were delisted from the Nasdaq National Market and the Company was unable to obtain or maintain listing on the Nasdaq Capital Market, the Company’s common stock would likely still qualify to trade on the OTC Bulletin Board or in the “pink sheets” maintained by the National Quotation Bureau, Inc. The board believes that in this event, stockholders would likely find it more difficult to obtain accurate quotations as to the price of the Company’s common stock, the liquidity of the Company’s stock would likely be further reduced, making it difficult for stockholders to buy or sell the Company’s stock at competitive market prices or at all, and support from institutional investors and/or market makers that currently buy and sell the Company’s stock would likely decline further, possibly resulting in a further decrease in the trading price of the Company’s common stock.
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(CM: In the fecal cascade--the journey downhill--I have little question that the above IS true.)
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In evaluating whether or not to authorize the reverse stock split, in addition to the considerations described above, the board of directors also took into account various negative factors associated with a reverse stock split. These factors include: the negative perception of reverse stock splits held by some investors, analysts and other stock market participants; the fact that the stock price of some companies that have effected reverse stock splits has subsequently declined back to pre-reverse stock split levels; the adverse effect on liquidity that might be caused by a reduced number of shares outstanding; and the costs associated with implementing a reverse stock split.
The board of directors considered these factors, and the potential harm of being delisted from the Nasdaq National Market. The board determined that continued listing on the Nasdaq National Market is in the best interest of the Company and its stockholders, and that a reverse stock split is necessary to attempt to maintain the listing of the Company’s common stock on the Nasdaq National Market. The board believes that stockholder approval of the Proposed Amendments which authorizes the board to effect a reverse stock split at one of three split ratios (1:2, 1:3 or 1:4), as opposed to approval of a reverse stock at a single specified split ratio, provides the board with increased flexibility to achieve the principal purpose of the reverse stock split as described above while also seeking to minimize to the extent consistent with this purpose the possible decreased liquidity which may result from a reduction in the number of outstanding shares. In determining the reverse split ratio, or whether a reverse split should be
implemented, the board will consider numerous factors, including any decision that may be issued by the Panel, the trading performance of the Company’s common stock, the Company’s projected financial performance, prevailing market and industry conditions and general economic and market trends, and will place emphasis on the expected closing price of the Company’s common stock over the short and longer period following the effectiveness of the reverse stock split with a view to enabling the Company to comfortably meet, for the foreseeable future, the Nasdaq National Market’s minimum bid price requirement for continued listing. Even if the stockholders approve the reverse stock split, the Company reserves the right not to effect the reverse stock split if the board of directors does not deem it to be in the best interests of the Company and its stockholders.
In addition, in determining to authorize the reverse split, the board considered that a sustained higher per share price of the Company’s common stock, which may result from the reverse stock split, might heighten the interest of the financial community in the Company and potentially broaden the pool of investors that may consider investing in the Company, possibly increasing the trading volume and liquidity of the Company’s common stock or helping to mitigate any decrease in such trading volume and liquidity which might result from the reverse stock split. However, as noted above, there can be no assurance that the price of the Company’s common stock would remain above $1.00 per share after the reverse stock split.
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(CM: "Trust us. We need flexibility. We do understand that Reverse Splits are not loved by investors. But, trust us. A presumably higher stock price post-RS COULD result in more analysts and a better profile for the company.)
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There also can be no assurance that, after the reverse stock split, the Company would be able to maintain the listing of the Company’s common stock on the Nasdaq National Market, or obtain or maintain the listing of the Company’s common stock on the Nasdaq Capital Market if the Company were unable to maintain listing on the Nasdaq National Market. The Nasdaq National Market maintains several other continued listing requirements currently applicable to the listing of the Company’s common stock, including a minimum stockholders’ market value of listed securities of $50 million, a minimum of 1,100,000 publicly held shares, a minimum market value of publicly held shares of $15 million, a minimum of 400 stockholders holding 100 shares or more (including stockholders holding shares in “street name”), a minimum of 4 market makers and compliance with Nasdaq’s corporate governance rules. The Nasdaq SmallCap Market also maintains initial listing requirements, as well as listing requirements, in addition to the minimum $1.00 per share bid price, for continued listing. While the Company is currently in compliance with these requirements of the Nasdaq National Market and would currently be in compliance with the analogous non-bid price requirements of the Nasdaq Capital Market, the Company cannot assure you that it will be able to maintain compliance with all of these requirements or the minimum bid price requirement.
Stockholders should recognize that if a reverse split is effected, they will own a smaller number of shares than they currently own (approximately equal to the number of shares owned immediately prior to the reverse stock split divided by 2, 3 or 4, depending on which split ratio is implemented and after giving effect to the cash payments in lieu of fractional shares described above). While the Company expects that the reverse split will result in an increase in the market price of the Company’s common stock, the reverse split may not increase the market price of its common stock in proportion to the reduction in the number of shares of its common stock outstanding or result in a permanent increase in the market price (which depends on many factors, including the Company’s performance, prospects, market perception with respect to the reverse stock split and other factors that may be unrelated to the number of shares outstanding).
If a reverse stock split is effected and the market price of the Company’s common stock declines, the percentage decline as an absolute number and as a percentage of the Company’s overall market capitalization may be greater than would occur in the absence of a reverse stock split. Furthermore, the liquidity of the Company’s common stock could be adversely affected by the reduced number of shares that would be outstanding after the reverse stock split. In addition, the reverse split will likely increase the number of the Company’s stockholders who own odd lots (less than 100 shares). Stockholders who hold odd lots typically may experience an increase in the cost of selling their shares, as well as potentially greater difficulty in effecting such sales. Accordingly, a reverse stock split may not achieve the desired results that have been outlined above.
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NOTE TO ALL: I HAVE SKIPPED A SERIES OF FAIRLY OBVIOUS AND INNOCUOUS PASSAGES RE: THE MATH OF WHAT HAPPENS TO SHARES AND HOW FRACTIONAL SHARES WILL BE COMPENSATED FOR
(CM: Now, we get to this INTERESTING PASSAGE...)
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Potential Anti-Takeover Effects
If the Proposed Amendments are approved by our stockholders and the reverse stock split is implemented, the increased proportion of unissued authorized shares to issued shares could, under certain circumstances, have an anti-takeover effect. These authorized but unissued shares could be used by the Company to oppose a hostile takeover attempt or to delay or prevent a change of control or changes in or removal of our board of directors, including a transaction that may be favored by a majority of our stockholders or in which our stockholders might receive a premium for their shares over then-current market prices or benefit in some other manner. For example, without further stockholder approval, our board of directors could issue and sell shares thereby diluting the stock ownership of a person seeking to effect a change in the composition of our board of directors or to propose or complete a tender offer or business combination involving us and potentially strategically placing shares with purchasers who would oppose such a change in our board or such a transaction. Although the increased proportion of unissued authorized shares to issued shares could, under certain circumstances, have an anti-takeover effect, the reverse stock split is not being proposed in response to any effort of which we are aware to accumulate the shares of our common stock or obtain control of us, nor is it part of a plan by our management to recommend a series of similar amendments to our board of directors and stockholders.
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(CM: As I have presumed that SKS is very concerned about CONTROL of the company, the above passage seems particularly revealing.)
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Our board of directors does not intend to use the reverse stock split as a part of or first step in a “going private” transaction pursuant to Rule 13e-3 under the Securities Exchange Act of 1934, as amended.
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(CM: Well, given the paranoia that this proposal creates all by itself... not counting the help of some of the "hyenae choir"... probably not a bad idea to explicitly deal with this issue.)
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CM Final Remarks before crashing:
** Will the Panel take into account "investor confidence in management" before rendering its opinion? If so, then, we may have a bit of a Catch-22 here... but the whole "investor confidence" question becomes important.
** I'm still wondering: Technically speaking, did the BoD have to seek shareholder approval to effect a Reverse Split?
** Are SKS' interests sufficiently aligned with our own so that we can all have some comfort that his choices are good for EVERYONE?
** In assessing decisions--mine and others--I **try** as best I can to take into account the "Me" (me preserving and advancing my interests) and "We" (the sense of some collective benefit) factors. Oftentimes, I think I'm working for the "We" when in reality it's just a tarted-up version of Me protecting what makes Me comfortable.
** Awk has said it right: In essence, IF the Wave business model is sound and is going to prove itself in the coming months and quarters, this whole RS issue is REALLY a non-event. Indeed, one can say that IF approved, it just (pardon the pun) re-stocks the reservoir of issuable shares... which can then become FODDER for secondary offerings at considerably higher prices.
** But, as the eminent Tim has pointed out: There is no HISTORICAL evidence to guide you to a easy conclusion about whether or not the Wave business model is sound. Actually, the remarkably easy conclusion based on historical evidence is that the business model WON'T work.
** I've been in for pennies and in for pounds. Though I am not CRAZY about this proposal (as should be clear by now)--though I have zero faith in Feeney's skills; indeed I am not sure that Feeney has any skills other than uncanny knack for self-preservation--and though the BoD DESPERATELY NEEDS NEW BLOOD and at least ONE member who has the expertise, strength, and a commitment to shareholder activism necessary to clear out some of the dead air in the private club--I will be voting FOR THE PROPOSAL.
Philosophically speaking--and only I will understand this, I'm afraid--I view this as the FINAL FRIGHT... the final illusion... which we need to get through. Yeah, but, nobody will get that one...
Practically speaking, I believe that TRUSTED COMPUTING as defined by the TCG is happening and in a large way. Will it happen exactly as I have researched it? No.
But, when you consider that SAFE-Biopharma now lists TPMs as one of the modalities to protect keys--when just a few months ago, a Certifications document on their site did NOT list TPMs--and when you consider that the prestigious, industry-leading and technology-centric City of Hope National Medical Center (a member of SAFE-Biopharma) has a new job posting for a data security analyst who will work in a "trusted computing environment" (and there is no doubt what is meant by the words "trusted computing"), I think the TCG is picking up steam.
Best Regards,
c m
