Emmis stock still dropping


Today, August 3rd, was to be the day that all of the stars got into alignment for founder and CEO Jeff Smulyan to take Emmis Communications. Instead, it is a day without clarity ahead of a scheduled shareholder vote and the expiration of two tender offers.

After falling nearly 11% on Monday, Emmis shares were down another 4% at midday Tuesday to $1.68. That signals that Wall Street isn’t betting on Smulyan pulling off the $2.40 per share buyout – at least not today.

The shareholders vote remains scheduled for 6:30 pm ET in Indianapolis, where Emmis is headquartered. Holders of both common and preferred stock are being asked to vote on changes to the company’s articles of incorporation which would clear the way for taking Emmis private. Smulyan alone has enough votes (with his super-voting Class B shares, plus Class A shares to boot) to ensure approval by the common shareholders. But approval by more than two-thirds of preferred shareholders is required and that is more problematic. A group of holders of the company’s preferred shares, led by Geoffrey Raynor and Daniel Loeb, have signed a lockup agreement to vote “no” unless they get a sweetened deal. In all, the members of the group hold more than one third of the preferred shares, so Smulyan can’t reach the required two-thirds “yes” vote without them.

Just where negotiations with the preferred group stand isn’t clear. Even if a deal is struck, Emmis might have to delay the shareholder vote and/or the tender expirations to update the documentation if there is any change in the terms.

Meanwhile, several purported class-action shareholder lawsuits which claim the buyout shortchanges current shareholders are still pending in Indiana and federal courts. An attempt by multiple plaintiffs in the Indiana courts to delay the proposed transactions failed, with a state court judge refusing to issue an injunction blocking the buyout at $2.40 per share.

Also due to expire today are the tender offers to take Emmis private. One tender is for common shares to be sold to Smulyan, with backing from Alden Global Capital, at $2.40 each. The other is for holders of preferred shares to exchange them for new payment-in-kind (PIK) bonds.