Nose Plugs 4 Less has been run poorly for a decade. It used to be the dominant nosebleed-preventer in the industry. But after years of, uh...leakage…the stock has come all the way down from $100 a share to $20 a share today.
Frustrated investors who bought in at $100 and $80 and $72 and $53 and $45 and $33...have written reams of complaint letters to the board, who just doesn't seem to listen to what is obvious as a fix. They have to fire the CEO and put someone in power who will...stop the bleeding. But they won't. For whatever reason.
So now, these angry shareholders...and yes, they are...Hostile...they get together and openly try to buy the company under a process where they purchase as many shares as they can buy.
And then, finally, when they have a majority ownership in the company, they start electing new board members…ones who actually…listen. Remember that it’s the common shareholders who elect the board...who hires the CEO...who hires…everyone else, pretty much.
And hostile takeovers still happen these days. Here’s one of the juicier ones, and arguably worst wealth destroying deal-passes in history…Microsoft tried to go hostile and buy Yahoo in 2008...And Jerry and the board didn’t listen.
So hostile takeovers are not necessarily bad. They’re only bad for poorly run companies. And even then, the common shareholders who actually own the company eventually get paid. So yeah - the best way to avoid a hostile takeover is, uh… always to plug the leak before it gets to be a problem...
Related or Semi-related Video
Finance: What is Cumulative Voting?6 Views
Finance, a la shmoop. What is cumulative voting? All right people there are two
flavors of voting in the land of common stock, there's cumulative and statutory. [Two ice cream cones held next to each other]
Cumulative voting just somehow sounds cooler, doesn't it? It allows teams to [Guy points at the ice cream cone and drops it]
join forces and pool their votes cumulatively
for target candidates to get elected that is it allows for the disaggregation,
$5 word there, of board members when voting. That is if a shareholder has one [5 dollar price tag appears]
percent of the common shares outstanding of a company and cumulative voting is [Pie chart showing the small 1% holding]
allowed and there are five candidates being elected, well that shareholder can
vote effectively five percent of their total shares voteable for just one
candidate. Said graphically with blood and guts it looks like this. Cumulative [Table showing shares equalling number of votes per candidate]
voting helps the little guy to have a big presence, with only 1% of the shares [Kid sat at a shareholder meeting]
the little guy can be felt as a 5% holder which makes you know him or her a [Kid jumping to hit a Mario coin box]
relatively major player. It also encourages boards to rotate seats [People swapping seats in the boardroom]
gradually, that is if there were seven seats coming up for election while that
1% could feel like 7% which starts to get dangerous in a contentious board and [The people in the boardroom start fighting]
company situation. You can imagine someone who only owns a small part of
the shares outstanding could elect a whole lot of board. Yeah that'd be a [Wooden boards replace the people in suits]
little scary. Well, score one for the little guy... [Kid laughing will an evil face]
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