There has been discussion among several large shareholders about buying ATRN to take it private and relaunch as an IPO within 18 months. I wonder if the director who is leaving is part of the group......
Good point..take for example Eric Schmidt, the google chairmans , who was on Apple's BOD. He recently resigned from the Apple BOD, and stated that b/c google and apple were now increasingly going after each other's business, his presence on the BOD would pose a conflict of interest-when that happens, a board member must resign. Based on common sense, it must be that he is putting together a deal of some kind b/c the timing of his departure intrigueingly coincides with the fact that the BOD is looking around for financing. Ellin is a financial guy-his profile alludes to a heavy weighted background in microcap stocks, also he does have leverage buyout experience. Also in addition to the timing of his departure, the board gave no reason at all. If it was for personal reasons, that would have been said. But perhaps it also could be that the co. started to report some really really bad metrics. A board member can be held personally liable if he doesnt discahrge his duty of loyalty and duty to use good business judgment (the business judgment rule) to us shareowners. Could that be the reason? In lieu of that, the reason he left could be very good for us or very bad...
I am long and think something is going on here for three reasons: 1) the company needs cash 2) the online music space is hot and they have a brand 3) the board member resignation was without explanation and simply a brief SEC filing.
With that said he could have resigned for several reasons:
1) wasn't worth the time anymore.
2) didn't like the deal they are going to sign and wanted to vote with both his feet by resigning
3) wanted to put something together on his own and felt he needed to resign to do it.
this is a very interesting thread....I added up all the insider shares forms 3 and 4..Per my calculation 40% of the co. is owned by the insiders..So if the managers wanted to take it private they would purchase 60% of the other shares and then wait until streaming music becomes the music industry standard and take it public again and make a boatload..most of the managers would stay on as that is what ussually happens. My guess is that Ellis, a long standing BOD member even when ATRN was called New Motion, stepped down due to the fact that he is putting together either a deal for equity financing to shore up the balance sheet and his co. would then get additional shares at a cheap price or 2) The execs realize by taking it private (ie the other 60% of the share) they could all make a bundle when they take it public in a few yrs...The stepping down of Ellis makes me really think either 2 of the above scenarios is developing and he had to step down to avoid a conflict of interest
Robert Ellis, the board member who resigned, represented Trinad Capital management - who invested in the firm several years back. In January this year, they distributed shares directly to their LP's., which means they no longer have a financial interest as a firm.
I will answer my own question..The controlling group, I suppose, who puts together a private equity offering to take out the shareholders, would have the control of the new private company and thus be able to issue new shares in this new co. Of course as stated previously, the private buyout would have to be voted on and approved by the old BOD. Again, Robert Ellis, has served on the board for 5 years, and is a financial guy whose background is in microcap stocks. Because he knows of the history of this co., it makes sense that his resignation is a precursor to a private equity buyout and his resignation is needed to avoid a conflict of interest by bidding on and then voting to approve his own bid
Brilliant controls the show not the departing and former board member.
I for one, would like the company to stay independent and focused on execution. Today's news of a major win for the IA division is a telltale for better things to come. These contracts are hard sought after, and the fact they won is great news. Kazaa, however, is the crown jewel IMO. Very curious to see how their subscriber-ship is going. They are spending the money to gain market share, that we know.
I just looked at the BOD profile members. He is not the only financial guy on the board. You are correct though. He is a financial guy who has a background in microcap stock investing. Yes, if he wanted to bid on the company to take it private, he would first have to resign from the board to avoid a conflict of interest ...Perhaps by bidding on the company, he would take it private and he would be a shareowner in the private company...but if he was putting together the deal for private equity financing, how would he be guranteed a voice on the private BOD?..How would he be guaranteed majority or minority shares in the new private company?
This is an excellent point..Taking the co. private would eliminate alot of sarbanes Oxley costs and pubco. costs, such that the co. would reach profitability much much faster..a private equity buyout would take out the shareholders and provide a cash infusion such that the liquidity needs would be immediately met. Of course, all the major shareholders would have a fiduciary duty to the minority shareowners-us..to give us a fair price...BD will own 74% of the shares when the Kazaa deal closes at the end of Q2..BD already owns 4.1 million shares and they are due another 1.7 million when thedeal closes...would $4 be a fair price? the BOD would have to vote on it and all of the shareowners would have to approve it..of course would BD sell at such a low price? they control it all, (except for that fiduciary duty they owe to us.) because they will own 74% of the shares in July 2011. I doubt that they would vote themselves a takeout price at 4 dollars..anyway...it seems obvious that the best way to solve alot of the problems facing the co. at this time is to do a private equity buyout that is what the Outback steakhouse did when they got into trouble and the premium was a good one
Devil's Advocate here.
If they do this do they not come in to the streaming game way too late?
i.e. Spotify and Pandora and who the hell kow whoelse will have already established their position and why would the market necessarily need another music streamer?
Curious about your thoughts.
Kazaa is live and the third largest player in on demand streaming music in the US right now. They can grow it and bring it public after the others come to market and get a much higher valuation. It makes sense in theory, but I don't think they are going to be able to get ATRN shares as cheaply as they might think. The float is so small that any piece of news sends the shares flying.
They might just do it for the contract they have with the music labels. Someone that wants to get into this game could probably buy Kazaa cheaper then doing a deal directly.
I would guess that Kazaa also has some interesting patents that would help somebody protect their business in this area.