Emmis gets tough with preferred shareholders


Emmis CommunicationsAfter months of battling with some of its preferred shareholders, Emmis Communications has called a special shareholders meeting to revise the terms of the preferred stock and also authorize a reverse split of its common stock. The latter would raise the stock price and stop the move by Nasdaq to delist the shares.

The exact date of the special meeting has not been set, but Emmis filed the preliminary proxy statement on Tuesday (3/13).

One proposal to be voted on would change the terms of the preferred shares, ending the obligation of Emmis to pay dividends on the preferred shares and designating them as “non-cumulative” rather than “cumulative.” It would also take away some of the current rights of the preferred shareholders in the event of a sale of the company or a going private transaction.

Passage of the changes requires a two-thirds approval of the preferred shareholders. Emmis holds voting power over preferred shares just shy of that mark, but had previously indicated that it could sell new preferred shares to a friendly party who would hand over the voting rights.

“Emmis responded to requests by our Preferred Shareholders for liquidity and offered all our preferred shareholders, including the few remaining holdouts, the opportunity for liquidity.  We were very clear in our most recent tender offer regarding the company potentially amending the preferred terms.  Our Board, with the exception of the Director elected by the preferred shareholders, recommends the common shareholders vote to approve the amendments to the terms of the preferred as well as vote to provide the Board the discretion to implement a reverse stock split,” said Emmis management in a statement sent Tuesday evening to RBR-TVBR.

Given the pending move by Nasdaq to delist Emmis’ stock, the reverse split authorization vote was not a surprise. If shareholders approve, the board of directors at Emmis will have the power to execute a reverse split ranging from one-for-three to one-for-eight.

With his super-voting Class B shares, Emmis CEO Jeff Smulyan holds more than enough voting power to guarantee that the common shareholder vote is sufficient to pass the reverse split authorization and the common share approval of the preferred stock changes. Only the two-thirds vote from the preferred shareholders is not in the bag – yet.

Emmis’ Class A common stock closed Tuesday at 72 and a half cents a share, still well below the $1.00 minimum set by Nasdaq. The preferred shares last traded on March 6th at $18.50.