Use It or Lose It

Dennis McCarthy – (213) 222-8260 – – 

I think we’re beginning to see a change in investor attitude about companies holding substantial cash.

Over the last several years, as we came out of the great recession, many companies accumulated cash, often in amounts well in excess of any foreseeable need.

For a time, investors’ reacted with relief that companies held cash in order to respond to unpredictable economic events and capital markets.

Now, investors seem less worried about companies facing unpredictable events and are more concerned about the return on their investments.

These investors, recognizing that the major economies of the developed world have slowed dramatically, are worried about the implications for earnings growth and stock price appreciation within their portfolios.

 We’re starting to see investors press companies to use their cash to grow or return the cash to investors through dividends or stock buybacks. 

The recent battle between Apple and Greenlight Capital has been cited as an example of this shift in investor sentiment. 

Without getting into the details here, this battle seems more about how to return capital rather than whether to return capital. 

Apple’s public filings (link) clearly indicate its position that it has extra cash and intends to return capital.  

Apple appears to me to be more forthright about its situation than many or most other public companies. 

So, I’ll be watching this issue play out.

How fast will investor sentiment change on companies holding cash hoards?

How much influence will investors have on companies’ use of cash?

How will companies use their cash?  We’ve already seen more stock buybacks. Will we see a surge in M&A?  Will we see an increase in the creation of dividend preferred stock?

This is an issue with significant capital market implications.

As always, please contact me to help your company with any capital market transaction.


2013 Proxy Season Prep

Dennis McCarthy – (213) 222-8260 –

It may seem early, but now’s the time to get prepared for the upcoming 2013 proxy season.

Last year’s proxy season was notable for greater shareholder activism as I discuss in my posts (Just a Small Leak, Silent Majority Speaks and Initial Results). 

I suggested this trend was fostered by the rise of proxy advisors in my video (Herding Cats) and would continue.

So, in preparing for the 2013 proxy season, small cap company executives and their boards of directors can gain valuable insights about this season’s key issues by listening to a webinar produced by the law firm, Latham & Watkins, and proxy solicitor, Georgeson.

This webinar covers many issues including proxy access (Potential Trojan Horse), “say on pay”, political spending and several more topics. 

It’s definitely worth the time.  It’s packed with information.  I highly recommend that you click on the link below.

I also encourage you to contact me to help your company to complete any capital market transactions.

Webinar link – registration required: 

Jan 24 addition – link to sign up for executive compensation consulting firm, Equilar, webinar series to prep for 2013 proxy season:

Jan 30 addition – For those of you who would like to see the quantitative data on the trends in proxy issues and proxy voting, I have two links, one to an article from the magazine, Corporate Counsel, which alerted me to survey data prepared by the Conference Board, which has its own link below.

Corporate Counsel Article Link:

Conference Board Survey Link:

Zombie Shares

Dennis McCarthy – (213) 222-8260 –

Well, “zombie shares” caught my eye.  I clicked on the article in the online magazine “Growth Capitalist” to find out just what are “zombie shares”.

Zombies, as I understand it, are the dead reanimated and controlled by someone through witchcraft.  Zombies move and react to their surroundings like they are alive but, in reality, they are not.

So, I presume that, “zombie shares” are shares of stock that look like normal shares but, in reality, are different.  In the example that follows, you’ll see that “zombie shares” may look like they’re still outstanding and held by the shareholder of record but, in reality, they are not.

In the “Growth Capitalist” article, the “zombie shares” are shares that have effectively been repurchased by and now voted by the issuing company but are left outstanding in the hands of the prior owner to permit the shares to be counted in shareholder votes. So, they’re “zombie shares”.

I mentioned something like this in prior posts on M&A defense such as “M&A Defense Checklist”.  In that context, however, a hostile investor would obtain effective voting control or effective ownership without tripping the definition of ownership to trigger a “poison pill” or 13(d) disclosure.  A hostile party, therefore, could control many more shares than its visible ownership would indicate.

At the time I posted, “M&A Defense Checklist”, I didn’t have a cool name like “zombie shares”.

The link to the article at “Growth Capitalist” is below.  Thanks to them for adding this colorful name.

As always, please contact me to assist your company to raise equity or debt or to complete M&A projects.


Silent Majority Speaks

Dennis McCarthy – (213) 222-8260 –

Link to New York Times article:

At the end of my last post “Just a Small Leak”, I posed the question whether we could discern a visible trend in shareholder activism or were we simply seeing an isolated incident in the situation I reported.

No sooner did I hit the post button than I found an article with another interesting data point.

This article reports several instances in which typically complacent institutional investors had become vocal, and with great impact.

To quote the article, “When traditionally quieter investors join the chorus, it resonates so much more.” [Dominic J. Auld, a lawyer  at Labaton Sucharow who represents institutional investors]

There are likely several catalysts for turning typically silent shareholders into vocal ones including:

(i)    the role played by Proxy Advisory firms as I described in my post “Herding Cats”,

(ii)   weak stock price performance and

(iii) occasional outrageous corporate behavior which gets wide news coverage.

You can click on the link to find the article entitled, “Once-Reticent Investors Join Shareholder Revolts” by The New York Times “DealBook”.

Please subscribe to my blog,, to stay informed on these and other capital markets topics. 

And please contact me to help your company with M&A activities and raising equity or debt.