This takeover defence theory has popped up a couple of times now. Although a number of people have indicated that it makes sense to them, I have seen no comments that explain exactly how handing 10% of the company to management protects us, assuming that we need protection that is.
Lets look at this. If somebody wants to takeover SSN they can acquire a little bit of the company on market, ie 5% before they need to file a significant shareholder notice which tells everybody who is interested that they are acquiring stock.
Next, if they keep on buying we can see it because they have to give us an updated notice every time they buy enough additional stock to move their holding by 1%. Its hard to just sneak up and suddenly have a big chunk of the company without anybody noticing all these notices.
Next, even if they kept buying and assuming small shareholders kept selling stock to them they couldn't go past 19.9% without writing to all of us personally and making us a formal offer. Each of us has the right to concider such an offer on its merits and nobody is compelled to accept it unless they can convince enough people to get them 90%.
This company is owned by thousands of small holders like you and me nobody can takeover our company unless we agree to it. If we each decide that such an offer was fair then we could accept it and smile. If we didn't then they would have to make a better offer or bugger off.
Exactly how does giving management an additional 10% of our company (in addition to what they already have in shares and options) protect us in this "takeover defense" ?
What exactly are we being protected from ? Ourselves ? The need for us to make a decision if there was an offer ?
The only thing that we seem to get from this if there was an imminent takeover is 10% less profit!
Can somebody who understands this takeover defense theory please explain the logic. I'm just trying to understand. It seems to make sense to a number of people but I'm a bit slow so I thank you in advance for helping me out with this one.
SSN Price at posting:
9.5¢ Sentiment: Buy Disclosure: Held
