Yes, but it is a change in 50% ownership of co. In other words if someone owns 40% and acquires additional shares that takes them to 70% it would not trigger an ownership change.
They could also go to 100% if they waited three more years but if they did it two years and 364 days after the prior acquisition it would trigger the ownership change rules.
Even the stock buy-back will trigger changes in ownership interests assuming Ash and Oak don't sell but it won't be enough to trigger the rules.
I'm not an expert on the rules but I understand the basics and I'm sure that Eric Smit and the Board looked at it before approving the share buy back.
http://www.kellogg.northwestern.edu/faculty/thompsnt/htm/d48/ftp/nol_stuff.ppt#260,5, IRC Section 382
Hopefully the link works. Do a google search for Section 382 if not.
It is an ownership change of 50% over three years that triggers the rule.
"Bottom line if Ash were to acquire enough shares it would have the effect of triggering the loss limitation and if he did this I would imply that he is saying eGain will never be profitable. Of course, it could mean a lot of other things too."
Really? Who do you really think has control now? Your implication, how can you imply it will never be profitable because he owns a bigger slice of what he already controls?
Please, are you able to explain your reply, all of it? Especially this one, "It is similar to say a capital loss carryforward that an individual might have. It can be a nice thing to have but you only get a benefit if you generate capital gains someday. If you die no one ever gets the benefit of the capital loss. That is a great analogy and I've never heard it made!"
That is the big question.
I don't think there will be true liquidity until they start kissing up to the investment bankers. I wouldn't do it if I were Ash; running a business is tough enough without them but that doesn't mean that wasn't what I was hoping for.
It is a minor point but section 7.6 of the above agreement indicates they can't buy back shares. That likely means they have or shortly will amend the loan agreement with Bridge Bank to allow for repurchase of shares.
That or maybe they will just pay the loan off and do the repurchases anyway; they have the cash to do so.
So all things considered it appears as if the share price should appreciate perhaps significantly. What is a fair value at this point? or are there too many unknown factors that are likely to keep the price neutral?