Zombie Shares

Dennis McCarthy – (213) 222-8260 – dennis@monarchbayassociates.com

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.

Article: http://www.growthcapitalist.com/2012/07/zombie-shares-race-to-bottom-at-issue-in-emmis-take-private-plan/