Investment Information Page -- Trading Securities Information

Going Private

A company "goes private" when it reduces the number of its shareholders to fewer than 300 and is no longer required to file reports with the SEC.

A number of transactions can result in a company going private, including:

• Another company or individual makes a tender offer to buy all or most of the company’s publicly held shares;

• The company merges with or sells the company’s assets to another company; or

• The company can declare a reverse stock split that not only reduces the number of shares but also reduces the number of shareholders. In this type of reverse stock split, the company typically gives shareholders a single new share in exchange for a block—10, 100, or even 1,000 shares—of the old shares. If a shareholder does not have a sufficient number of old shares to exchange for new shares, the company will usually pay the shareholder cash based on the current market price of the company’s stock.

While SEC rules don't prevent companies from going private, they do require companies to provide information to shareholders about the transaction that caused the company to go private. The company may have to file a merger proxy statement or a tender offer document with the SEC. In addition, if the transaction is initiated by an affiliate (an insider) of the company, Rule 13e-3 of the Securities Exchange Act of 1934 requires the affiliate to file a Schedule 13E-3 with the SEC.

The filing of a Schedule 13E-3 is also required when affiliated transactions result in a company’s publicly held securities no longer being traded on a national securities exchange or an inter-dealer quotation system, such as Nasdaq.

The Schedule 13E-3 requires a discussion of the purposes of the transaction, any alternatives that the company considered, and whether the transaction is fair to all shareholders. The Schedule also discloses whether and why any of its directors disagreed with the transaction or abstained from voting on the transaction and whether a majority of directors who are not company employees approved the transaction.

Going private transactions require shareholders to make difficult decisions. To protect shareholders, some states have adopted corporate takeover statutes that provide shareholders with dissenter's rights. These statutes provide shareholders the opportunity to sell their shares on the terms offered, to challenge the transaction in court, or to hold on to the shares. Once the transaction is concluded, remaining shareholders may find it very difficult to sell their retained shares because of a limited trading market.