Like all insurance, as claims rise, so do premiums. Ultimately, the cost comes out of shareholder pockets
The word "ultimately" is the key there. I may not be a shareholder in this company or its successor going forward.
I don't wish to damage TCR. Damaging Knight and or Lerner would be appropriate given what they have done. They sold out the investors after they neglected the store. They deserve some punishment.
D&O insurance is a fig leaf. Like all insurance, as claims rise, so do premiums. Ultimately, the cost comes out of shareholder pockets (plus administrative costs and insurance company profit).
Scortched earth is a risky way to try to kill a merger. e.g. Yukos management recent attempt to sabotage tax sale of subsidiary resulted in proceeds insufficient to pay tax bill-> rest of company now will be dismantled for tax bill.
Damaging TCR may simply cause terms to be renegotiated with part of payment to TCR shareholders withheld to cover costs of litigation. Such contingency clauses are more common in private deals. Due to costs, public companies often buy insurance--at sellers expense, an insurance company takes over the risk. Again shareholders get a reduced price.
Having been an investor for many years and seen maby shareholder class actions, Class action lawyers are the lowest slimiest lifeforms. They settle with management for a payment of your (shareholder and/or insurance-driving up premiums paid with company funds) money plus attorney's fees. This is effectively a forced dividend reducing the value of the stock and has shareholders, effectively, paying boths sides legal fees to boot. Since this entity is already paying out eveything in dividends, the net result would be either a cut in dividend or more debt. Generally, the announcement or expectation of "shareholder" lawsuits causes the stock price to decline.
"or is this just your hope."
In the IPO they detailed possible conflicts of interest that they might have. One wonders if the potential conflicts of interest have occurred at levels that would rise to fraud.
It seems to me that this merger was not in the best interests of shareholders. Is that fraud? Only time will tell.
How would they be subject to jail time? Is there a pending trial or is this just your hope. I know their finances seem pretty screwy but maybe it was just bad decisions, not criminal behavior. Is there something you know that your fellow investors should know?
Think positive. Mabye Knight will have to do some jail time and get to be someones boy toy LOL. I sure would like to see something bad happen to him and David Lerner. Just the thought of them doing jail time makes me very very happy.
Perhaps a lawsuit where the burden of payment falls on them and wipes them out financially.
Something bad anything as long as it is bad.
They deserve it.
Of course, company will try to bury any fine. Result will most likely be a "settlement" with no fine broken out.
I'm only guessing but potential sources of dispute include:
1) overly agressive depreciation
2) A screwup on 1031 tax free exchange rendering them taxable.
3) Something related to flipping MRYP properties into new merger. MRYP was odd vehicle being a taxable(nonREIT) corporation. Transfer of assets to REIT without full capital gain at corporate level is complex.
4) Worst case (extremely unlikely given disclosure requirements if it were the case) would be dispute over violation of REIT status rules
The most likely items--1) and 2) have some subjective components and are based heavily on case law. To some extent, it is in shareholders interest that management be agressive in these areas. Merger will generally trigger buyer to be extremely cautious and protect itself (at seller's expense) from any potential acquired tax issues. This means that buyer, during due dilligence process, may bring issues into the open that the IRS would most likely not have reviewed if they had not been brought to its attention.
The most anoying thing to me was the threat of changing 2004 dividend treatment after the fact. This messes up my personal tax planning which is quite complex this year.