A quick $792 max gain, 36% profit--Going Private
For anyone looking for a quick $792, i can deliver that on a maximum investment of $2200 in this wonderful arbitrage opportunity. If you intend on investing less, at current prices you are looking at a 36% gain. The stock going private is AssuranceAmerica Corp(Pink:ASAM), which currently trades at $.22. At some point after Dec. 8th, ASAM will go private to reduce its shareholder count to below 300-eliminating its need to report to the SEC and reducing its SEC registration related expenses. Going Private, ASAM will convert its stock into the right to recieve $0.30 in cash(which is where i get my 36% profit). ASAM has already filed an amendment to its SC13E-3 Filing and should be expected to complete the transaction Dec. 8th or a few market days afterwards. Thats the essence of the trade: below for those interested are some copy/paste with a bit(very tiny bit) of editing that I got from the SEC Filings that give insight into why this is a great opportunity:(skip if you just trust me :P )
“The primary purpose of the going private transaction is to reduce the number of record holders of the Company’s common stock, par value $0.01 per share (the “Common Stock”), to fewer than 300, thereby allowing the Company to terminate the registration of the Common Stock under Section 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and suspend its reporting obligations under Section 15(d) of the Exchange Act.
To accomplish this reduction in the number of record holders of the Common Stock, the Company will effect a reverse stock split of the Common Stock, whereby each 10,000 shares of Common Stock outstanding as of the effective date of the reverse stock split will be converted into one whole share of Common Stock (the “Reverse Stock Split”).
In lieu of issuing any fractional shares to stockholders owning fewer than 10,000 pre-Reverse Stock Split shares, the Company will make a cash payment equal to $0.30 per pre-Reverse Stock Split share to such stockholders.
Accordingly, stockholders owning fewer than 10,000 pre-Reverse Stock Split shares, after the Reverse Stock Split, will have no further interest in the Company, no longer be stockholders of the Company and will be entitled to receive only a cash payment equal to $0.30 multiplied by the number of pre-Reverse Stock Split shares owned by them.
The stockholders who will be cashed out as a result of the Reverse Stock Split own, in the aggregate, less than 10% of the Common Stock outstanding immediately before the Reverse Stock Split[perhaps explaining why the exchange rate is 1:10,000 instead of higher rates that hedge funds could latch on too]
. The Reverse Stock Split will also provide for a corresponding decrease in the number of authorized shares of Common Stock from 120,000,000 shares to 12,000 shares. Timing: The Company intends to effect the Transaction as soon as practicable after all filing requirements have been satisfied. In general, the Company may not consummate the Reverse Stock Split until 20 days after the date on which it first mails this Disclosure Statement to its stockholders.[that was Nov. 18th, so the split could be expected to take place on or shortly after Dec. 8th]
Reasons for the Transaction
Although we have been a public reporting company since August 1999, we believe we have derived only minimal benefits from being a public reporting company. Benefits of being a public reporting company (“Public Company Benefits”) typically include: access to the public markets for liquidity purposes for our stockholders; access to the public markets for purposes of raising capital through the sale of securities; and the ability to make acquisitions using securities as consideration.
Our common stock has failed to attract significant interest from institutional investors or market analysts. This has resulted in a relatively low trading volume and market capitalization, which has limited the liquidity benefit to our stockholders. In addition, the legal requirements of public reporting companies create large administrative and financial costs for us. As a small company with limited managerial resources, we believe that these financial resources and this time could more effectively be devoted to other purposes.
Our Board of Directors believes that consummating a going private transaction is a necessary step to reduce corporate overhead costs by eliminating the costs associated with being a public reporting company, including with respect to filing reports with the SEC, complying with certain of the rules and regulations under the Sarbanes-Oxley Act of 2002, and complying with applicable corporate governance requirements. Furthermore, our Board of Directors has determined that the costs of being a public reporting company currently outweigh the Public Company Benefits and, thus, that it is no longer in the best interests of the Company or its stockholders, creditors, or other stakeholders, including unaffiliated stockholders, for the Company to remain a public reporting company, for the reasons described below. The primary purpose of the Transaction is to reduce the number of record holders of our common stock to fewer than 300 to enable us to elect to deregistered our common stock under the Exchange Act and suspend our duty to file periodic reports and other information with the SEC thereunder. The Board believes that the Transaction provides the most certainty for the Company to achieve this purpose.
•Exchange Act Reporting Costs. The Company incurs significant direct and indirect costs in complying with its periodic reporting and other obligations under the Exchange Act (collectively, the “Public Company Costs”), including: the legal, accounting, printing, mailing, public relations, compliance and administrative costs of preparing, reviewing, filing, printing and distributing the reports and other filings required under the Exchange Act; the broker and transfer agent charges for forwarding materials to beneficial holders of our common stock; management’s time and attention expended in preparing and reviewing such reports and other filings; and the substantially higher premiums for directors’ and officers’ insurance policies payable by public reporting companies. The Company’s direct, out-of-pocket costs comprising the Public Company Costs were approximately $750,000 during 2010.[With previous year’s total income before tax totaling 1.93 million, SEC registration took 38% of pre-tax net income.]
While we presently have no specific plans to do so, we may, periodically, send stockholders financial and/or other information. We anticipate that our consolidated financial statements will be subject to audit only to the extent required by applicable law and covenants in any credit or financing agreement which we may enter. We expect that, in connection with any pending litigation, contractual, regulatory and general business issues, we will, from time to time, engage and confer with outside counsel, as needed.
In addition, the Company believes that the Transaction and subsequent deregistration of our common stock and the suspension of our duty to file periodic reports and other information with the SEC, will allow our management and employees to devote more time and effort to improving our operations.
•Liquidity for Small Stockholders. Our Board of Directors believes that holders of fewer than 10,000 shares of our common stock may be deterred from selling their shares because of the lack of an active trading market and because of disproportionately high brokerage costs. The trading volume in our common stock has been, and continues to be, limited. Our common stock does not trade every day. The average daily trading volume of our common stock over the twelve-month, six-month and three-month periods ended September 30, 2011 was approximately 1,725, 1,290 and 400 shares, respectively. Our Board of Directors believes that the Transaction would give stockholders who are cashed out an opportunity to receive a fair price in cash for their shares without having to pay disproportionately high brokerage commissions. The Cash-Out Price of $0.30 per share of our common stock held prior to the Reverse Stock Split represents a premium of 88% over the average closing price of our common stock over the 90-trading day period ended October 5, 2011.
•Lack of Capital from Public Markets. In addition to the Public Company Costs, the Company is not able to, and does not presently intend to exploit, many of the Public Company Benefits. The price of our common stock has significantly declined over the last decade, from a high bid quotation of $7.50 during the quarter ended June 30, 2001 to a high bid quotation of $0.17 on October 5, 2011. The current trading price of our common stock would make using it as a vehicle to raise capital or to provide acquisition consideration extremely dilutive to our stockholders. As a result, the Company is not receiving any of the traditional Public Company Benefits, yet, the Public Company Costs continue to increase, substantially depleting the limited resources of the Company. The increase in costs arises, among other things, because of an increase in securities regulation. Our Board of Directors believes that the Public Company Costs, if continued, would be detrimental to the financial condition of the Company.