Lime Energy (LIME) – Going Private – 24% upside (record holders only)

Current Price –$2.02;

Expected pay-off – $2.49;

Upside – 24%;

Expiration Date - TBD (shareholder vote on 10th of November, 2016)

Record holders of less than 300, 500 or 1000 shares will be cashed out (the reverse split ratio has not been determined yet).

SEC filling

 

Background:

Lime Energy intends to deregister from SEC by reducing the number shareholders of record to below 300 through reverse/forward stock split transaction. Each stockholder of record owning fewer than a minimum number of shares (300, 500, or 1000, exact ratio TBD) immediately prior to the effective time of the reverse stock split will receive at least $2.49 in cash. The cash-out price might be higher if 10 day average price before the effective time of the reverse split would be above $2.49. 

Management estimates that deregistering would save $0.8m-$1m annually and should cost only $0.2m-$0.3m to implement the corporate action and to cash-out shareholders. So the savings argument seems to be well founded. Company had >$2m in cash in Jun, 16, thus financing should not be a problem either.

Shareholders will vote on transaction approval on the 10th November, 2016. Final reverse split ratio will also be decided later to ensure that fewer than 300 shareholders of record remain.

 

Cash-out applies only to RECORD Holders.

As per SEC filling:

“In determining whether the number of the Company’s stockholders of record falls below 300 as a result of the Reverse/Forward Stock Split, the Company will count stockholders of record in accordance with Rule 12g5-1 under the Exchange Act <…> securities are considered to be “held of record” by each person who is identified as the owner of such securities on the records of security holders maintained by or on behalf of the issuer. Investors that hold their shares in “street name” through a brokerage or other account are not considered to be record holders. Rather, these shares are registered in the name of Cede & Co., as nominee for The Depositary Trust Company (“DTC”), which holds such shares as a depository for banks, brokerage firms, and other institutions. SEC rules provide that each bank, brokerage firm, or other institution that clears through a depository is considered a separate record holder for purposes of Rule 12g5-1.”

Therefore, before pursuing this transaction, you should check with the broker whether you can have the shares transferred to your own name and how much would that cost.

17 COMMENTS

    1. dt

      I know only that IB doesn’t allow to do that at all and suggested I try buying shares through banks that offer trading possibilities. But I am not able to advice you on any specific names.

    1. dt

      The reverse split ratio will be determined later, but it will be at least 300:1. I am not sure when exactly will the management announce the final ratio, but they are asking shareholders to approve all of them and then will select the one necessary to reduce shareholder count below the SEC limit.

  1. James O'Leary

    Sounds like the company hung up on analyst on Q3 call when disgruntled investors asked too many questions.

  2. Kevin Cox

    So if we have 999 shares vote against the two smaller splits and for the 1000:1?

    1. dt

      I think shareholders will vote for one split only. And the company will decide before the meeting which split should be put forward for the vote.

  3. Nick Meilinger

    So use the decline to close to 2 USD to buy 299 shares already? Then add additional ones in case of the vote being on 1000/500?

    1. dt

      Nick, that could be one of the strategies. But keep in mind that you need to be record holder to participate in this. Owning shares through broker will not make you eligible for cash-out – shares need to be transferred in your own name.
      I have no position in LIME as I have no possibilities to be record holder.

  4. dt

    I had couple shares of LIME, just to see what happens with this ‘record’ requirement. Yesterday got the below message from IB – apparently it is possible to transfer the shares for cash-out, but have no idea how much it costs. If anyone found any additional info regarding this, would be great if you shared.

    “Please be advised that the Lime Energy Company, Symbol LIME has announced a 1-299 reverse split and a 299-1 forward split. IB has been notified by the company and the Depository that a cash out provision for beneficial holders of 299 shares or less will not be applied to IB holders. The cash out is only at a participant level, meaning all of IB shareholders will net out as 1 position. As such, individual account holders under the threshold who would like their shares to be cashed out would have to transfer their shares to the transfer agent, Wells Fargo. Their phone number is 855-217-6361. Please contact them for help in the transferring of the shares. Otherwise, shares will be converted on a 1-1 basis to your IB account upon allocation from the Depository. If further information or assistance is then needed in transferring shares, please submit a web-ticket to our Funds & Banking Department. Please Note: Fees may be applied for transferring of positions. “

    1. Makarid

      I asked my broker about this(he has a broker account with IB and i am under him).He told me that the cost is something like 100$.But i am not sure.

  5. Philip Faulconer

    Did any of you complete this transaction with the shares held in your name and not in your broker’s “Street Name”? I did not learn of this requirement until after the reverse stock split completed so I missed out on this one (and got stuck holding the stock).

    How did you get the shares held in your name and did it cost anything?

    How did the transaction work out overall for you?

    Thanks!

  6. S.Even

    If you have a large enough balance with Schwab they will transfer your shares out to be registered in your name for zero cost. I believe you need to hold US$500,000 in your accounts.

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