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gnulaw (51.61)

On Reverse-Splits and Geeknet's (GKNT) Pending 1:10 Reverse-Split: In Perspective

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October 05, 2010 – Comments (2) | RELATED TICKERS: GKNT , YHOO , AOL

On Reverse-Splits and Geeknet's (GKNT) Pending 1:10 Reverse-Split


Kenneth Langone emerged on the scene July 08, 2010. announcing a 1:10 reverse-split on August 4th. He and his "partners" now control 2/3 of GKNT's Board of Directors and approximatedly 30% of GKNT's common stock. Geeknet filed SEC DEF 14/A formally on September 13th announcing a 1:10 reverse-stock split to be held at a Special Shareholders meeting on October 14th.

So why did Kenneth Langone announce a 1:10 reverse-split on the heels of he and his partners amassing a 30% position? Langone, alone accumulated over 600,000 shares within weeks of his arrival. 


Note: Kenneth Langone is also a Director and beneficial majority shareholder of Unify (UFI). UFI also announced and filed a pending 1:3 reverse-split on October 27th. Unify also has approximately the same number of shares outstanding as Geeknet (60M).

Below are several articles addressing this controversial move including other companies that pursued this strategy. 

"...Sometimes less can mean more. The folks at Norwalk, Conn.-based Priceline.com are hoping this is true. The discount online travel firm announced a 1-for-6 reverse stock spilt effective today. In most cases, reverse stock splits are meant to bolster market confidence and, in Priceline's case, eliminate outstanding excess common stock..." (5).

"...When stocks perform well, an announcement of a coming stock split can make investors even more optimistic about the future. In theuncertain market environment we're facing now, however, many companies either have already made or are considering reverse stock splits to boost their share prices from extremely low levels. Still, investors have to wonder: Will reverse splits do any good, or are they basically the kiss of death for a company?..." (4).

"...I was mid-Exorcist on hearing that AIG (NYSE: AIG) posted a profit of $2.30 a share in its latest quarter. Wasn't the disgraced insurer trading for a buck and change earlier this summer? Did it actually earn more in a single quarter than its share price? The spinning was short-lived. I quickly realized that AIG had declared a humbling 1-for-20 reverse split recently, so a profit of $2.30 a share for the insurer today is actually $0.115 a share in June dollars. However, seeing AIG's stock trade as high as $28 this morning now finds me clearing room in my "exception to the rule" mantelpiece. For now -- at least -- AIG has become one of the rare companies to subject shareholders to a reverse stock split and win.

Anatomy of a split
It wasn't pretty at first. AIG swapped out every 20 shares that closed at $1.16 at the end of June for a single share originally valued at $23.20. The first few trading days after the zero-sum move proved disastrous..." 
(3)

Don't bet against Geeknet (or Kenneth Langone)? (2,1). It's all in the earnings...


References:


1.  (August 4, 2010)  Los Angeles TImes, Priceline.com shares hit 10-year high as earnings soar.

2.  (September 29, 2010) Don't bet against Priceline (or William Shatner).

3.  (August 7, 2009)  Motley Fool, Reverse Splits Aren't Always Fatal.

4.  (July 2, 2009) Motley FoolDo Reverse Splits Ever Work?

5.  (June 16, 2003) Forbes, Priceline May Join Reverse-Split Winners Club

2 Comments – Post Your Own

#1) On October 19, 2010 at 5:33 AM, gnulaw (51.61) wrote:

"...Item 5.07.      Submission of Matters to a Vote of Security Holders. At the Special Meeting of Stockholders of Geeknet, Inc. (“Geeknet” or the “Company”) held on October 14, 2010 (the “Special Meeting”), proxies representing 47,468,495 shares of Common Stock or approximately 78% of the total outstanding shares of the Company were present.


At the Special Meeting the stockholders of the Company voted to approve amendments to Geeknet’s Amended and Restated Certificate of Incorporation, as amended, which would effect a reverse stock split of Geeknet’s outstanding common stock at a reverse split ratio of one-for-ten, reduce the total number of shares of common stock that Geeknet is authorized to issue to 25,000,000, and reduce the total number of shares of preferred stock that Geeknet is authorized to issue to 1,000,000 and authorize the Board of Directors to file a Certificate of Amendment to Geeknet’s Amended and Restated Certificate of Incorporation, as amended, to effect the foregoing. The proposal received 44,642,054 votes for, 2,462,599 votes against, 363,842 abstentions, and no broker non-votes..."

Source: SEC FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): October 14, 2010. Filed October 18, 2010.

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#2) On October 19, 2010 at 8:10 PM, gnulaw (51.61) wrote:

(October 14, 2010)  Ken Langone Discusses Wall Street, U.S. Economy: Audio

"...Ken Langone, chief executive officer at Geeknet Inc., co-founder of Home Depot Inc. and former New York Stock Exchange board member, talks with Bloomberg's Pimm Fox and David Wilson about the challenges of starting a business, Wall Street and his outlook for the U.S. economy..."

(Source: Bloomberg)

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