Eagle Broadband (fka EAGB)

[Darrell]

PLEASE READ! Forwarded message from Investorvillage.

Eagle's bankruptcy case converted to a Chapter 7 liquidation; table of dilution history.

My guess as to the outcome of Eagle's bankruptcy is that no reorganization plan will ever be approved, and, instead, the case will be converted to a Chapter 7 liquidation sometime in the next six months. Upon such a conversion, the remaining market demand for the stock would presumably evaporate, but the stock would not formally cease to exist until the liquidation was completed and the corporation dissolved.

I correctly guessed the outcome, but I was off by a factor of two in the timing. Eagle submitted a reorganization plan on June 20, 2008, and a hearing on confirming it was scheduled for July 30. However, fund-raising transactions essential to the plan were never consummated. Eagle then had the confirmation hearing date pushed out several times while it attempted to salvage the plan. Today, it conceded that there was no hope, and the court converted the case to Chapter 7. Here are the minutes from the hearing:

U.S. Bankruptcy Court

Southern District of Texas

Notice of Electronic Filing

The following transaction was received from tcam, entered on 2/4/2009 at 10:59 AM CST and filed on 2/4/2009
Case Name: Eagle Broadband, Inc. and United Computing Group Inc.
Case Number: 07-80605
Document Number:

Docket Text:
Courtroom Minutes. Time Hearing Held: 10:45. Appearances: David Askanase for the debtor, Ellen Hickman for the US Trustee, David Elder for Dean Cubley. (Related document(s):[447] Amended Disclosure Statement) Confirmation hearing - Debtor unable to go forward with confirmation. Case converted to Chapter 7. Order signed. (tcam, )

(https://ecf.txsb.uscourts.gov/cgi-bin/DisplayReceipt.pl?293815,2103)

For a complete copy of the case file, see the bankruptcy page at http://eagle.petrofsky.org/.

The last trade of EAGB before the court minutes were entered at 11:59 EST was at $0.005/share. Another 88,000 shares have since been traded at the same price, at 14:07 EST. Considering that there are 89,907,089 shares outstanding (see Exhibit A to the bankruptcy petition), this share price values the corporation at a remarkable $449,535, which is almost half a million dollars off from the true value. What on Earth the traders of EAGB have been thinking eludes me. Even if Eagle had successfully reorganized, the plan had specifically called for the common stock to be canceled with no distribution. See the plan at Article 11.1 ("All currently outstanding Eagle Common Stock shall be canceled as of the Effective Date. Holders of currently outstanding Eagle Common Stock shall receive no distribution under the Plan. All obligations pursuant to Eagle Common Stock shall be Discharged.")

A year ago, an Eagle shareholder sent a message to my investorvillage account, thanking me for publishing the eagle.petrofsky.org site and asking for my opinion of EAGB's situation, saying "Any enlightenment, speculative or 'wild-assed guesses' would be appreciated." This was my response:

I'm glad to hear you've found the website helpful.

To answer your question: it is a virtual certainty that Eagle's current series of common stock will be canceled with no distribution. You should be glad that at least the shareholders won't have to pay the creditors. For more information, see my post, #10878, on Investorvillage's EAGB board.

Here's a more candid assessment of the big picture:

Eagle has a long and remarkably consistent record of losing money hand over fist for seven consecutive years. In October 2005, Eagle decided to file an obviously dishonest and meritless lawsuit against message board posters. Since at least that time, I believe it should have been clear to everyone that Eagle's directors and officers had no ability and no desire to run a profitable corporation. They are shysters whose principal talent is the ability to sell prodigious quantities of worthless stock to fools.

Here's a table of Eagle Broadband's shares outstanding during the last year and a half before it filed for bankruptcy protection. It shows the amazingly rapid rate at which Eagle was able to sell more and more shares and maintain a multimillion-dollar market capitalization, despite it having no credible prospects for profitability:


Date Shares
Outstanding Share
Price Market
Cap. Source Notes
2006-05-12 315,495,312 $0.050 $15.8M 2006-05-15 S-1 Old shares, CUSIP 269437109
2006-05-12 9,014,153 $1.750 $15.8M 2006-05-22 424B3 New shares, CUSIP 269437208 (1-for-35 reverse split)
2006-05-31 9,647,893 $2.130 $20.5M 2006-07-17 10-Q

2006-06-13 9,858,939 $1.220 $12.0M 2006-06-19 S-3/A

2006-07-20 10,586,344 $0.700 $7.4M 2006-08-01 S-1

2006-08-31 12,092,758 $0.630 $7.6M 2006-11-20 10-K

2006-09-29 12,808,629 $0.630 $8.1M 2007-06-20 S-1/A

2006-10-31 17,656,797 $0.750 $13.2M 2006-12-15 DEF 14A

2006-11-30 18,103,204 $0.640 $11.6M 2007-01-16 10-Q

2006-12-19 19,606,978 $0.540 $10.6M 2006-12-22 S-3

2007-01-12 21,526,962 $0.490 $10.5M 2007-01-18 S-1

2007-02-28 21,890,125 $0.370 $8.1M 2007-04-23 10-Q

2007-03-23 23,472,808 $0.280 $6.6M 2007-06-20 S-1/A

2007-04-20 28,287,677 $0.160 $4.5M 2007-04-24 S-1/A

2007-05-31 30,646,409 $0.170 $5.2M 2007-07-23 10-Q

2007-06-18 34,070,822 $0.140 $4.7M 2007-06-20 S-1/A

2007-07-24 44,642,081 $0.046 $2.1M 2007-07-27 S-1/A

2007-08-23 66,545,893 $0.032 $2.1M 2007-08-28 S-1

2007-09-26 76,784,536 $0.032 $2.5M 2007-10-09 S-1/A

2007-11-12 89,907,089 $0.024 $2.5M 2007-11-14 BK pet.