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).
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.