Riverstone seeks to block shareholder meeting
Cabletron Sytems spinoff Riverstone Networks will be going to bankruptcy court on Thursday in an attempt to thwart a March 7 shareholder meeting that a Delaware state court ordered to be held before Riverstone filed for Chapter 11 bankruptcy protection earlier this month.
The meeting – ordered Dec. 22 by the Delaware Court of Chancery – was in response to a complaint filed by dissident shareholder Charles Grimes in October 2005 that Riverstone had not met in years.
Grimes owned 3.5 million shares as of November 2004, making him one of the company’s largest stockholders, according to his complaint. He argued that despite bylaws providing that stockholders meet annually, shareholders haven’t met since July 2002. In addition, the stockholders have elected only one of eight board members. Therefore, Grimes argues, they should all stand for election at the next meeting.
The Delaware court ordered that the company should give notice to the meeting and whoever showed up – whether it be by proxy or in person – should constitute a quorum.
In its filing with the bankruptcy court last week, Riverstone said the shareholder meeting could disrupt the board of director’s planned bankruptcy sale to Lucent for $170 million. It argued that it could not issue proxies for a shareholder meeting because it was unable to produce audited statements that are supposed to accompany the proxy. On Feb. 10, the Securities and Exchange Commission revoked Riverstone’s certificate to trade publicly because it hadn’t filed those statements.
As a result, it is possible that a “small number of Debtor Riverstone’s Stockholders, indeed perhaps only Mr. Grimes, will appear at the Stockholder Meeting and make broad, sweeping changes to the Debtor’s management and directorship at a time when their continuity and focus are critical to the success of Debtors’ sale efforts,” according to the company’s appeal.
The sales efforts would benefit most stockholders because they would “double the 40 cents the stock traded before the petition,” once the bankruptcy process was completed, the appeal claims.
Several shareholders on an Internet bulletin board were distressed by the 80 cents-a-share figure. Riverstone’s stock price was more than 50 cents before the petition was filed – it only dipped under 45 cents once before in the past year – and it had shot up to $1.07 after the bankruptcy filing because investors thought that the company had $120 million in cash.
Many hung on to their stock in the few days between the bankruptcy filing and before the SEC halted trading, hoping that they would get as much as $1.50 a share, not 80 cents. However, subsequent filings indicated that Riverstone might have a lot less cash on hand.
The court set a hearing on the matter for Feb. 23. – BOB SANDERS