Earlier in the day, we contacted the Maryland state court (Corvex, et al v. Commonwealth REIT). At that time, clerk said no injunction was "possible" because defendant had not yet been served. TROs are often granted ex parte, so not sure why she said "impossible." However, in Delaware County Employees Retirement Fund v. Portnoy, et al, No. 13-cv-10405-DJC (D. Mass.), plaintiffs did file a separate Motion for Temporary Restraining Order and accompanying memorandum brief, request for expedited discovery, inter alia. As of 4:20 Eastern Time, no entries have been made in the docket indicating that the TRO was granted.
Why you should care: if an injunction is not granted today, Monday, or Tuesday, the secondary dilutive offering will go forward, and —unless the company announces they're negotiating with Corvex, et al.— I would expect the share prices to experience a major sell-off when the new shares settle.
I have posted the opposition brief. Unfortunately, because of all the spammers that Yahoo! still has not figured out how to eliminate, I am unable to put the URL here, no matter how cryptic (I tried three times). If you want to see the link, it is contained in one my comments to the Seeking Alpha article, "CommonWealth REIT Shareholders Fight For Control," which you can easily Google and find.
Significantly, Commonwealth claims that it did not know about the Corvex developing offer, that the secondary had been planned in advance, that the shares have already been sold and have changed hands several times over, and that the Corvex offer —by its own admission— is steep discount to the value of the shares. Interestingly, Commonwealth also relied on the fact that the share price closed at $25.25 on Thursday as evidence that the offering did not have the effect of devaluing the company. This latter argument, however, seems self-defeating, as it is clear and obvious that the reason for the elevated prices was the buyout threats. But, whatever.
ELECTRONIC NOTICE Setting Hearing on Motion 4 Emergency MOTION for a Temporary Restraining Order, Expedited Discovery, and a Preliminary Injunction Briefing Schedule : Motion Hearing set for 3/4/2013 12:00 PM in Courtroom 11 before Judge Denise J. Casper. Any opposition to the Motion for a Temporary Restraining Order to be filed by 8:00AM on Monday, March 4, 2013. Counsel for the plaintiff is directed to serve this electronic notice setting this hearing on the defendants immediately.(Hourihan, Lisa) (Entered: 03/01/2013)
Here's the memorandum brief in support of the TRO: chimicles dotCom/wp-content/uploads/2013/02/TRO-Brief-as-filed.pdf (You will need to supply the "dotCom" when pasting into your browser). As I suspected, they are arguing that the secondary offering price is 25% below current market value, but they are failing to disclose that Mr. Market thought this stock was only worth $16 before the Corvex & Related debacle. Anyone here notice the fishy end-of-day trading that occurred yesterday? Conveniently timed for this litigation? Indeed. From the brief: "As a result of pricing the Offering at $19 per share versus the
$25.25 per share closing price on February 28, CWH will forgo over $186 million in capital
because of the Trustees’ below-market pricing."
Thanks for posting that. I wonder if the Maryland state court did anything, today. Nevertheless, they're going to have to show (1) inadequacy of a remedy at law, (2) irreparable and immediate harm; (3) feasibility; and (4) probability of success on the merits. Although it may be possible to show feasibility if the TRO is granted before the shares settle on the 5th, and although immediate and irreparable harm is the heart of their case, I see problems with the rest: courts are generally reluctant to substitute their judgment for that of a Board of Directors when it comes to business judgment on things like secondary offerings, managing debt, etc. Here, the apparent self-dealing may make for a more compelling case, but the proper remedy for bad board is to vote them off over time (this is staggered board). Another shareholder told me that shareholders don't vote them off because they're held largely by fund managers, who don't exercise the votes. That's too bad, but that doesn't mean the court should step in to do for shareholders what they have not done for themselves over the years. On the other hand, a couple of shareholders indicated that they were given the opportunity to "vote" for the one board member's position that is currently up, but they were only given the choices of "Yes" or "Abstain." If the court was to find that there was unfairness in the process of the shareholders' abilities to vote the Board off (which probably won't be an issue sufficiently developed at a TRO hearing), then that could be another brick in the wall.