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WXMN - Waxman Industries


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Well, the recent buyer certainly can! :) I wonder how much he/she can get, but I have not seen such an outrageous takeout for a while.

It traded roughly 30k at $3.17 on Monday. The statement was out by then, though I didn't get in mail until Wednesday.

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Well, the recent buyer certainly can! :) I wonder how much he/she can get, but I have not seen such an outrageous takeout for a while.

It traded roughly 30k at $3.17 on Monday. The statement was out by then, though I didn't get in mail until Thursday.

 

Yeah, are you considering appraising? Unfortunately I do not own any, but I would love to. The valuation is ridiculous.

 

I guess you are aware of this post - https://www.valueinvestingblog.net/waxman-industries/

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Well, the recent buyer certainly can! :) I wonder how much he/she can get, but I have not seen such an outrageous takeout for a while.

It traded roughly 30k at $3.17 on Monday. The statement was out by then, though I didn't get in mail until Thursday.

 

Yeah, are you considering appraising? Unfortunately I do not own any, but I would love to. The valuation is ridiculous.

 

I guess you are aware of this post - https://www.valueinvestingblog.net/waxman-industries/

Thanks for link - I hadn't seen that before.

Yes I will perfect appraisal rights.

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I am in the process of an appraisal, you can go to the Shareholders Forum for help. http://www.shareholderforum.com/

 

However, things changed recently.  Let me know if the below link doesn't work for you.

 

Hedge funds face ‘game over’ for buyout strategy - https://www.ft.com/content/bff78906-e2c4-11e7-97e2-916d4fbac0da via @FT

 

Basically, the appraisal rights was being somewhat abused by hf's but this Dell ruling is taking an efficient market hypothesis that the deal price is correct, and ending this hf strategy.  As a result shareholder forum may not help in every situation like they may have in the past.

 

However, there are circumstances where you can make a good argument that the market wasn't allowed to find a fair price.  This one seems that way and the price is egregious.  This should have merit despite the Dell ruling.  So these cases still are worth fighting, just a warning that recent decision does make this bit harder.

 

Are their financials you can send me?  I would like to take a look and can speak to people in the know about their thoughts on how this could proceed.  And I may be interested too.

 

So far there has been a good bit of upfront paperwork, but IB was pretty good.  Can't speak to rest of process as its still ongoing. 

 

PM me if you have any more direct questions.  Not sure how much I can help but would be happy to try.

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I am in the process of an appraisal, you can go to the Shareholders Forum for help. http://www.shareholderforum.com/

 

However, things changed recently.  Let me know if the below link doesn't work for you.

 

Hedge funds face ‘game over’ for buyout strategy - https://www.ft.com/content/bff78906-e2c4-11e7-97e2-916d4fbac0da via @FT

 

Basically, the appraisal rights was being somewhat abused by hf's but this Dell ruling is taking an efficient market hypothesis that the deal price is correct, and ending this hf strategy.  As a result shareholder forum may not help in every situation like they may have in the past.

 

However, there are circumstances where you can make a good argument that the market wasn't allowed to find a fair price.  This one seems that way and the price is egregious.  This should have merit despite the Dell ruling.  So these cases still are worth fighting, just a warning that recent decision does make this bit harder.

 

Are their financials you can send me?  I would like to take a look and can speak to people in the know about their thoughts on how this could proceed.  And I may be interested too.

 

So far there has been a good bit of upfront paperwork, but IB was pretty good.  Can't speak to rest of process as its still ongoing. 

 

PM me if you have any more direct questions.  Not sure how much I can help but would be happy to try.

3rd Q financials start on p 128 in info statement attached to first post.

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One issue here that I ran into when attempting one of these is that the Delaware court requires $1 million in share value to bring an apprasial action.  Given the market cap, you need own a large number of share & it needs to be big enough to for the lawyer to make money on the contingency.  Good luck, one the surface it looks like an uphill battle.

 

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Due to this being a DE company, I'm pretty sure you can only perfect dissenters rights if you or a group or shareholders representing 1% of outstanding shares that were continuously owned since and settled prior to 1/16/2018 (since it is impossible to dissent with $1m in shares).

 

It's going to be nearly impossible to get legal help at that monetary level.

 

Dark micro caps that have: (1) mgmt with controlling ownership; and (2) trading at large discounts, are heavily incentivized to screw minority shareholders just like WXMN is doing. I've basically stopped looking in this pool of ideas because of current circumstances and rules. Maybe if the company was incorporated in a minority shareholder-friendly state I'd consider, but controlling ownership makes dark companies essentially uninvestable in my opinion.

 

I hope I'm wrong and you all win.

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Due to this being a DE company, I'm pretty sure you can only perfect dissenters rights if you or a group or shareholders representing 1% of outstanding shares that were continuously owned since and settled prior to 1/16/2018 (since it is impossible to dissent with $1m in shares).

 

It's going to be nearly impossible to get legal help at that monetary level.

 

Dark micro caps that have: (1) mgmt with controlling ownership; and (2) trading at large discounts, are heavily incentivized to screw minority shareholders just like WXMN is doing. I've basically stopped looking in this pool of ideas because of current circumstances and rules. Maybe if the company was incorporated in a minority shareholder-friendly state I'd consider, but controlling ownership makes dark companies essentially uninvestable in my opinion.

 

I hope I'm wrong and you all win.

Wasn't aware of $1 million and 1% thresholds. Thanks for pointing it out.

1% is 13,210 shares. I am more than half way there and I know one other with 30k and 2 others with unknown quantity,  so if we team up we should be good on that count.

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I don’t know anything about appraisals - no clue if this is a profitable operation given small market cap, chances of failure and legal costs. Nevertheless I think it’s awesome that you do this. All the best and it would be really appreciated if you could keep us posted.

H

If you can make a compelling case for the appraisal I’m sure you can find a few fellow buyers on this forum (though if Schwab is right then that wouldn’t really help).

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Due to this being a DE company, I'm pretty sure you can only perfect dissenters rights if you or a group or shareholders representing 1% of outstanding shares that were continuously owned since and settled prior to 1/16/2018 (since it is impossible to dissent with $1m in shares).

 

It's going to be nearly impossible to get legal help at that monetary level.

 

Dark micro caps that have: (1) mgmt with controlling ownership; and (2) trading at large discounts, are heavily incentivized to screw minority shareholders just like WXMN is doing. I've basically stopped looking in this pool of ideas because of current circumstances and rules. Maybe if the company was incorporated in a minority shareholder-friendly state I'd consider, but controlling ownership makes dark companies essentially uninvestable in my opinion.

 

I hope I'm wrong and you all win.

Wasn't aware of $1 million and 1% thresholds. Thanks for pointing it out.

1% is 13,210 shares. I am more than half way there and I know one other with 30k and 2 others with unknown quantity,  so if we team up we should be good on that count.

 

Most of the statements about the law posted on this board are wrong or incomplete.  I suggest anyone interested in pursuing appraisal rights seek the advice of a Delaware lawyer who specializes in this area.  A lawyer like that would be able to tell you whether you have appraisal rights in two minutes and would do so for free as part of a discussion about retaining him or her to pursue an appraisal remedy. 

 

The following links may be of interest to you, but are not a substitute for speaking to counsel: 

 

http://delcode.delaware.gov/title8/c001/sc09/

 

https://www.paulhastings.com/publications-items/details/?id=e6a4e969-2334-6428-811c-ff00004cbded

 

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I would suggest you do discuss with counsel but the statements from above (1% & $1 million minimums in Delaware) were from counsel in a specific situation & not our interpretation.  In addition, the counsel needs to make enough from his contingency to make it worth his while.  If you know of counsel that would take cases below this amount for Delaware corporations it would be nice to know.  TIA.

 

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Due to this being a DE company, I'm pretty sure you can only perfect dissenters rights if you or a group or shareholders representing 1% of outstanding shares that were continuously owned since and settled prior to 1/16/2018 (since it is impossible to dissent with $1m in shares).

 

It's going to be nearly impossible to get legal help at that monetary level.

 

Dark micro caps that have: (1) mgmt with controlling ownership; and (2) trading at large discounts, are heavily incentivized to screw minority shareholders just like WXMN is doing. I've basically stopped looking in this pool of ideas because of current circumstances and rules. Maybe if the company was incorporated in a minority shareholder-friendly state I'd consider, but controlling ownership makes dark companies essentially uninvestable in my opinion.

 

I hope I'm wrong and you all win.

Wasn't aware of $1 million and 1% thresholds. Thanks for pointing it out.

1% is 13,210 shares. I am more than half way there and I know one other with 30k and 2 others with unknown quantity,  so if we team up we should be good on that count.

 

Most of the statements about the law posted on this board are wrong or incomplete.  I suggest anyone interested in pursuing appraisal rights seek the advice of a Delaware lawyer who specializes in this area.  A lawyer like that would be able to tell you whether you have appraisal rights in two minutes and would do so for free as part of a discussion about retaining him or her to pursue an appraisal remedy. 

 

The following links may be of interest to you, but are not a substitute for speaking to counsel

 

http://delcode.delaware.gov/title8/c001/sc09/

 

https://www.paulhastings.com/publications-items/details/?id=e6a4e969-2334-6428-811c-ff00004cbde

 

Very good advice. I'm not a lawyer.

 

Here's where I got my information on $1m/1%:

http://www.foleyhoag.com/publications/alerts-and-updates/2016/august/latest-amendments-to-delaware-law-revise-appraisal-rights

 

 

For your appraisal valuation:

Also, in the WXMN Information Statement (p.18-22) shows the "Opinion of Candlewood Partners". If you do indeed intend to pursue this, I would replicate Candlewood's analysis and correct where they were overly conservative.

 

For instance, the liquidation analysis (p.21) assumes 51% of cash is recoverable. With the recent tax plan (post-merger offer), they can bring that cash home for 15.5% or so. That's an additional $2.4m in value correcting that one number.

 

When I looked in to dissenters' rights for a CO company, many folks mentioned that if I can find errors in the company's appraisal it will make your case easier. However, on first glance Candlewood was very thorough (in # of methods attempted) and I didn't see any other egregious valuations. I'm attaching my very rough estimate for the ABV with and without discounts.

 

 

Finally, at least in many non-DE states, case law exists to support no discounts in an appraisal situation where dissenters' rights were perfected (in my case, I found Pueblo v. Lindoe (2003)). This is not DE precedent and I have no idea if there is similarly useful law in DE. Might be worth looking into if you pursue this though. No discounts would certainly help.

2018_02.04_WXMN_-_ABV_No_Discounts.thumb.JPG.8f008655d71972ac2a397f953e165cfc.JPG

2018_02.04_WXMN_-_ABV_Discounts.thumb.JPG.821afdb6026a929b0690e151bd6529dd.JPG

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I would suggest you do discuss with counsel but the statements from above (1% & $1 million minimums in Delaware) were from counsel in a specific situation & not our interpretation.  In addition, the counsel needs to make enough from his contingency to make it worth his while.  If you know of counsel that would take cases below this amount for Delaware corporations it would be nice to know.  TIA.

 

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As you noted, you received advice about a "specific situation."  Were you asking about a company that trades on the pink sheets?

 

On that point, I note the following from DGCL 262(g), which is portion of the statute containing the 1%/$1 million requirements [emphasis mine]:

 

"If immediately before the merger or consolidation the shares of the class or series of stock of the constituent corporation as to which appraisal rights are available were listed on a national securities exchange, the Court shall dismiss the proceedings as to all holders of such shares who are otherwise entitled to appraisal rights unless (1) the total number of shares entitled to appraisal exceeds 1% of the outstanding shares of the class or series eligible for appraisal, (2) the value of the consideration provided in the merger or consolidation for such total number of shares exceeds $1 million, or (3) the merger was approved pursuant to § 253 or § 267 of this title."

 

Regarding finding a lawyer, the first questions you'll likely be asked are (i) what is the potential recovery from your shares; and (ii) are you willing to front the cost of the expert fees (a valuation expert being an essential part of any appraisal case)?  It is often the increased risk of having to bear the out-of-pocket cost for an expert that will cause an attorney to refuse a contingency case. 

 

If you'd like to discuss this further, PM me and I can provide names of lawyers who may consider smaller cases under the right circumstances. 

 

 

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Note the caveat in the Foley Hoag memo regarding "national securities exchange."  I quoted above a portion of DGCL 262(g) that may interest you.

 

Nice catch. This is really helpful info. Thanks, KJP.

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Note the caveat in the Foley Hoag memo regarding "national securities exchange."  I quoted above a portion of DGCL 262(g) that may interest you.

 

Nice catch. This is really helpful info. Thanks, KJP.

 

No problem.  But the caveats above apply to me as well -- I'm just an anonymous person on a message board.  If you (or anyone else reading this) is considering an investment strategy involving appraisal rights or something similar, you should talk to an attorney.  And not just some attorney you happen to know or the one that did your estate plan or the one that negotiated your last severance package.  Find one that focuses on representing people in your situation.  It will be worth the effort.

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I would suggest you do discuss with counsel but the statements from above (1% & $1 million minimums in Delaware) were from counsel in a specific situation & not our interpretation.  In addition, the counsel needs to make enough from his contingency to make it worth his while.  If you know of counsel that would take cases below this amount for Delaware corporations it would be nice to know.  TIA.

 

Packer

 

As you noted, you received advice about a "specific situation."  Were you asking about a company that trades on the pink sheets?

 

On that point, I note the following from DGCL 262(g), which is portion of the statute containing the 1%/$1 million requirements [emphasis mine]:

 

"If immediately before the merger or consolidation the shares of the class or series of stock of the constituent corporation as to which appraisal rights are available were listed on a national securities exchange, the Court shall dismiss the proceedings as to all holders of such shares who are otherwise entitled to appraisal rights unless (1) the total number of shares entitled to appraisal exceeds 1% of the outstanding shares of the class or series eligible for appraisal, (2) the value of the consideration provided in the merger or consolidation for such total number of shares exceeds $1 million, or (3) the merger was approved pursuant to § 253 or § 267 of this title."

 

Regarding finding a lawyer, the first questions you'll likely be asked are (i) what is the potential recovery from your shares; and (ii) are you willing to front the cost of the expert fees (a valuation expert being an essential part of any appraisal case)?  It is often the increased risk of having to bear the out-of-pocket cost for an expert that will cause an attorney to refuse a contingency case. 

 

If you'd like to discuss this further, PM me and I can provide names of lawyers who may consider smaller cases under the right circumstances.

 

Good point. It was on a national exchange. Also given the size of my position & the potential contingency on the gain, there was not much an attorney or valuation expert I could afford, although I could have done the valuation myself in the end I am not sure it was worth the time vs. spending it on finding new ideas.  In any case I hope the poster has better luck than me.

 

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  • 4 weeks later...

For those that have asked, I will summarize process so far.

 

Fidelity had a problem with pulling a cert in my IRA account (said it would be a withdrawal) so I transferred the shares to an account I have with a friend who clears Wedbush.

Wedbush has been through the process before and handled it expertly for a fee of $400. I hold the shares as a beneficial holder with Cede & Co the record holder.

 

Wedbush told me on 2/21, "We are pleased to report that the Dissenter Letters from DTC and the Demand for Appraisal of your common shares have been delivered this morning to the Company. Please receive the two attachments, FEDEX proof of delivery and copies of the documents delivered.  As  previously discussed with you, the Company should now be contacting you as a Dissenting Shareholder. "

 

I am in contact with another shareholder who has a lawyer (also experienced in Delaware dissents) ready to take the collective case. He said no money out of pocket will be required. We will proceed to a strategy meeting if and when the deal closes.

 

See attachment for letter.

dissent_0001.pdf

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