Potential Legal Issue with CEO stock sale & Merger ??? Very Worried?
I own stock in a pink sheets company and the stock value, unfortunately is down to $.02. I have heard through the grapevine, that the CEO who owns 170 Million shares of the total 200 milllion shares, is considering merging with a larger private company who would like to be listed publically. The problem is, that we believe he is going to announce a merger and he will supposedly have sold his stock holding to the company for approximately $2 million, while not giving the existing public shareholders any cash, they just get to keep their stock at what it currently trades at which is only $.02!
1. I would like to know if this is legal?
2. Doesnt the CEO have to have this merger company offer the existing public shareholders the same price per share to sell?
3. Isnt the CEO required to have a shareholder meeting to discuss a corporate structural change before it happens?
4. And finally, Isnt the CEO's fiduciary responsiblity, (who is also one of only two Board members), to us as the shareholders and wouldnt he be required to conduct a shareholder vote?....even though he as the single largest shareholder would certainly pass the merger vote, but doesnt his legal responsiblity require him to notice all shareholders of a vote before this merger can just HAPPEN, and then he tells us in a press release?
THANK YOU FOR ANY HELP IN ANSWERING THIS, AS WE ARE ALL SMALL SHAREHOLDERS AND WORRIED THAT THIS CEO IS DOING THINGS ILLEGALLY AND IT WILL MAKE OUR STOCK WORTHLESS.
- Anonymous1 decade agoFavorite Answer
You typically have to own premium stock to be the kind of shareholder that gets invited to meetings. You would have to own a significant portion of stock, which at $.02 you might. Although he might hold a meeting for those people, he doesn't have to--it's literally a CEO's job to act in the best interest of the shareholders.
Clearly the company is doing very poorly and your stock will probably have much more success under the new company.
I would be more careful about acting on inside tips regarding stocks and especially about verbalizing the possible decision to do so. Everything the CEO has done is ligit, and I promise their are experienced attorneys involved ensuring that this goes over smoothly and as legally as possible to avoid any major loss in money over legal issues.