Parker Drilling (PKD) – Reverse Split – $40 for Odd Lots

Current price: $19.59

Cash-Out Price: $30

Upside: 50%

Expiration Date: expected in Jan 2020

 

Yet another odd-lot case for some lunch money. For more detailed background on PKD and previous offer refer to this post.

PKD intends to deregister from SEC by conducting a reverse split and reducing total shareholder count to below 300. Fractional shareholders will be cashed out at $30/share. Under the terms of the previous proposal, the reverse split was supposed to happen at 100-1 ratio, but as odd-lots piled in and the cost of transaction increased, company made amends.

Now the reverse split ratio is undefined, but will stand between 5-1 and 100-1. PKD board has sole discretion to decide on this. The ratio will be announced immediately preceding the transaction.

Buying 4 shares and waiting for the announcement seems to be the easy way to play this.

Shareholder meeting is set for 9th of January and if approved the transaction should proceed shortly afterwards.

55 COMMENTS

  1. Zulu Investment Partnership

    Do we need to tender the four shares or do we just wait for further news?

  2. Random Deals

    PKD stated in its press release regarding the revised ratio range of 5-1 to 100-1 :  “At this time, the Company believes that any reverse stock split ratio within the proposed range would reduce the number of record holders below 300, which is the level at or above which the Company is required to remain an SEC registrant.”  

    How can the company be so sure? Does it have a record of all accounts that own its shares and how many shares in each account?  That’s not public info?

    BTW, any news on the outcome of the shareholder meeting?

  3. Ben

    Have they changed to only cash out stockholders of record?

    From the Jan 9 meeting press release:

    “A stockholder of record owning immediately prior to the effective time of the reverse stock split fewer than a minimum number of shares, which, depending on the stock split ratios chosen by the Board, would be between 5 and 100, would only be entitled to a fraction of a share of common stock upon the reverse stock split and will be paid cash in lieu of such fraction of a share of common stock…”

    https://www.prnewswire.com/news-releases/parker-drilling-company-announces-results-of-special-meeting-of-stockholders-300984685.html

    1. dt

      That is identical language to the proxy statement from 25th of Nov. However, the same proxy statement had additional section on beneficial owners:

      Treatment of Beneficial Holders (Stockholders Holding Shares in “Street Name”)
      We intend to treat persons who hold shares of our common stock in “street name,” through a bank, broker or other nominee, in the same manner as persons who hold shares of our common stock in their own names.

  4. brianclark08057

    I do not believe it is too late to get in. Xbit announced a Dutch tender this morning odd lots can make 500 bucks. They will buy 420,000,000 worth of stock between 30-33.

  5. Ben

    Today say a 10% decrease in price with 3x the average volume. Any ideas who sold and why?

      1. W51W52

        Eh…..that’s Pacific Drilling. We’re talking about Parker Drilling here….

  6. don.chambers.pub@gmail.com

    I have been looking into PKD. I did buy 4 shares and I am waiting to be bought out.

    Highbridge capital is the largest shareholder with 39%, and they have been buying as late as last week. I don’t see where any executives sold, but a couple were exercising options back in March.

    The second largest shareholder (Brigade) has been selling since November.

    I have to assume Highbridge voted for this, and probably the executives are for it.

    Why do they want to go private and remove liquidity?
    Perhaps the better deal here is a long position, but I don’t know how you realize your gain.

    I bought this in a Roth IRA. What happens when it’s not longer public? Where do the shares go?

  7. Jim Rivest

    Don, they are going dark and not going private. The shares will still trade.

  8. don.chambers.pub@gmail.com

    Jim,
    Does that mean they are delisting? Or just not filing with the SEC?

  9. Sean McMahon

    What’s the worst case scenario that could happen if you bought 99 shares and the split ratio was set lower than that? If the shares are still trading, it seems like the potential upside outweighs the risk. Also, the math says that using a lower exchange ratio (e.g. 5-1) makes getting the owner count under 300 a lot less likely than a higher ratio. It doesn’t seem possible that there are enough owners of <5 shares that using a 5-1 ratio gets the count below 300.

    1. jwestern

      Have a look at the older post on this idea (linked above). The 300 count is “shareholders of record.” If you own through a broker, you’re not counted as an additional shareholder. If I understand correctly, the broker itself is the “shareholder of record,” whereas you would be a beneficial owner who owns the shares “through street name.”

      Currently the terms say that beneficial odd lot owners will also be bought out. I think worst case scenario is they remove that, then you don’t get anything. This possibility is described in the old post, and has been done before.

      If you end up with shares left over, I think you could still sell them on the over-the-counter market. But someone could correct me.

  10. Sean McMahon

    A few quick data points which I don’t believe has been mentioned yet.

    From the 2018 10-K:
    “As of March 6, 2019, there were 441 stockholders of record.”

    From the 3Q 10-Q:
    “Based upon information provided as of September 24, 2019 and for illustrative purposes only, we estimate that the cash payment to cashed out stockholders, professional fees and other expenses would be approximately $1.6 million, if the reverse stock split ratio were 50.”

    It should be noted as well that, as of referenced date of 9/24/19, the split ratio had not yet been amended and was 100-1. So, that $1.6mm estimate should be inclusive of folks purchasing shares to exploit the odd lot provision. Cash and equivalents as of 9/30/19 was $101mm.

    1. jwestern

      Could you clarify your last point there? I’m unable to get there based on the Sept 24. 2019 quote you shared.

  11. Ben

    I see the shares are now trading OTC. Did the splits already happen or are we still waiting?

      1. W51W52

        I haven’t seen any filings yet….I know PKD disappeared and turned into PKDC

        1. fishwithwings

          Same. I’m guessing they changed the terms of the split…

    1. dt

      The reverse/forward stock split has already been finalized (at least that is my understanding) and yes they will pay out $30 for fractional shares.
      See this filing https://www.sec.gov/Archives/edgar/data/76321/000119312520079587/d851748dsc13e3a.htm

      Apparently, the 50:1 decision was made on the 21st of February.

      “On February 21, 2020, the Company’s Board of Directors (the “Board”) determined to effectuate the (i) Reverse Stock Split at a Reverse Stock Split Ratio of 1-for-50 and (ii) the Forward Stock Split at a Forward Stock Split Ratio of 50-for-1. The Board also determined to abandon all other Stock Split Ratios within the ranges approved by the stockholders at the special meeting. On March 19, 2020, at the direction of the Board, the Company filed certificates of amendment to the Company’s Charter, at which time (the “effective time”) a stockholder of record owning immediately prior to the effective time fewer than a minimum number of shares, which, based on the Stock Split Ratios chosen by the Board, was 50 (the “Minimum Number”), became entitled to a fraction of a share of common stock upon the Reverse Stock Split and will be paid cash in lieu of such fraction of a share of common stock, on the basis of $30.00″

  12. Jamal.Sydney

    I noticed there was no mention of beneficial owners, only shareholders of record. I owned under 50 shares (beneficial, not registered) and they still show in my account. Has anyone else on here been bought out?

  13. Random Deals

    PKDC closes at 6.36 per share today (Yahoo Finance). Can someone just buy it now and tender for $30 per share?

    1. dt

      No. Reverse/forward stock split was effectuated on the 19th of March and it seems that only record holders of less than 50 shares were cashed out.

      1. ijw

        So you had to be a registered shareholder? I own 99 shares on IB, and still got all my 99 shares. I should have 50 shares now?

        1. dt

          Apparently yes, you had to be registered shareholder. In previous communication company always said they will treat beneficial holders the same way as record holders, but it seems that did not happen.

          Also from the final wording cash-out procedures seems to apply only to owners of less than 50 shares, rather than any fractional amount indivisible by 50.

          “The Corporation shall pay an amount in cash, without interest, equivalent to $30.00 per share of Common Stock of the Corporation held by such holder immediately prior to the time this amendment becomes effective and that such record stockholder shall no longer have any further rights as a stockholder of the Corporation.”

          https://www.sec.gov/Archives/edgar/data/76321/000007632120000018/charteramendmentsreversest.htm

        2. ijw

          Hmm I put in a sell order for 50 shares. But probably too late now? I guess I will forever hold some tiny fractional amount of shares of some crappy US drilling company then :D.

  14. W51W52

    Message that I got from Interactive Brokers:

    IBKR will be electing at the Depository for shareholders of 49 shares or less.

    NOTE: DTC’s window to elect is open until 3/30, so the absolute earliest DTC will actually allocate the cash is 3/31 but we anticipate it to be done at some time after.

    So we’ll see what happens during the first week of April.

    1. rmg141

      I hold shares at Schwab, any idea what specifically I should tell their Corporate Actions department with respect to electing? I’ve called in to them and they can’t seem to find any election option…I told them that DTC’s window for election is open until 3/30 but I don’t seem to be getting any traction (Is there a choice to receive $30 or continue to hold, as there would be in a tender for instance? Or do they need to elect to treat me as a record holder individually or something like that?)

    2. nmeile87

      Any update from IB on this?
      Still see my <50 shares listed at the moment.

  15. dt

    I have received a couple of messages from SSI members, that beneficial holders (in ‘street name’) of less than 50 PKD shares have also been cashed out. So apparently my assessment of company’s regulatory fillings that cash out applies to record shareholders only was incorrect.

    Any ideas what was the record date for this?

      1. dt

        Yes I saw that, but apparently some shareholders in street name have also been cashed out. So seems a bit of the mess.

        Interested in hearing how it ended up for the others.

    1. Writser

      I have contra cusips in my brokerage accounts. I doubt that there are people who have actually received the cash yet. The statement from the company strongly suggests that March, 19 was the record date. However, as of today the reverse split is on the FINRA daily list with an effective date of April, 15 and accompanying text that suggests shareholders as of yesterday will be cashed out.

      I do think holders in street name will be cashed out. However, I’m not sure what the relevant record date will be. I think the company itself was not aware of these intricacies either and is now trying to deal with the unforeseen consequences. We will see how it all works out.

  16. W51W52

    If the record date is March 19th instead of April 15th, it means that you could have sold your 49 or less shares between those two dates, and still be eligible to receive $30 per share. That hardly seems fair, but it won’t be the first time something like that happened (historical example: BIND therapeutics, but that was a dividend/liquidating distribution instead of a reverse/forward split).

  17. Random Deals

    Message on 4/15 from IB:

    “IBKR elected at the Depository for shareholders of 49 shares or less to be paid in cash. There is no estimated payment date at this time by the Depository. Once they make the payment, IBKR will make the payment.

    At this time there is no information as to when this will be paid.”

    1. Vincent

      My IB account showing PKDC position as PKDC.CSH now. However, the position is valued at $7/share rather than $30/share. The $7/share was the closing price on 4/14/2020. I also see they changed ticker from PKDC to PKDCD.

  18. Terence

    Does anyone else gotten payment or know when payment will be made?

  19. jwestern

    I still haven’t received any cash payment. I’m with Scotia iTrade in Canada. Anyone else also waiting?

  20. rmg141

    Update: I spoke to soon on Schwab — they reversed the cash and I now have a contra cusip (as it appears everyone else does — with the following legend: PARKER DRILLING CO XXX CASH OUT OF HOLDERS OF 49 SHS OR LESS AT $30.00). Sorry for any confusion my earlier post may have caused.

  21. Jim Rivest

    Vanguard and Etrade also have not received any cash payments. I tried several different actions with this deal, so we’ll see how it goes. I had <50 shares in accounts BEFORE the 'supposed' date the company is using and left some of those alone , but I also topped off some of these family accounts to 49 shares AFTER that date and then bought 49 shares at $7 in other NEW family accounts AFTER that date, so I'll see how all 3 are treated.

    1. dt

      Very curious to hear the outcome. I am guessing all those held till actual date (not the announced effective date in March) will be cashed out.

  22. nmeile87

    Again mention of “only such stockholders of record” in Q1 financial statement – available via their website (sign up required to access):
    “Recent Stock Splits- On March 19, 2020, we filed with the State of Delaware certificates of amendment to the Company’s certificate
    of incorporation, which became effective upon filing, to effectuate a 1-for-50 reverse stock split, which was followed immediately
    by a 50-for-1 forward stock split. As disclosed in public filings with the Securities and Exchange Commission (the “SEC”), only
    stockholders of record owning fewer than 50 shares immediately prior to the effective time of the reverse stock split (i.e. as of
    6:51 p.m. ET on March 19, 2020) are entitled to a fraction of a share of common stock as a result of the reverse stock split under
    Delaware law and, accordingly, only such stockholders of record are entitled to be paid cash in lieu of such fraction of a share of
    common stock on the basis of $30.00, without interest, for each share of common stock held by such holders immediately prior
    to the effective time. As a result of the forward stock split, the total number of shares of common stock held by stockholders
    owning at least 50 shares immediately prior to the effective time of the reverse stock split did not change”

  23. Terence

    Still no timetable yet for the payment of $30/sh. The record date (or effective date per company) of 3-19-20 is irrelevant. DTC actually implemented or effected it 4-16-20 (should be 4-15), so this is the relevant date for holders of less than 50sh to get $30/sh. All of this per a broker, which seems reliable.

    As Writser pointed out a month ago, FINRA daily list website confirms this April date. Link below: type in PKDC and the tab on the right side will show: April 15 as the effective or ex date. Correspondingly, symbol temporarily changed to PKDCD on April 15 morning for a month.
    https://otce.finra.org/otce/dailyList?viewType=Dividends%2FDistributions%2FSplits

    My own opinion: the company can insist all they want about March 19 to be the cutoff, but DTC’s implementation is what counts. What I don’t know is, if the April 15 date was released to the public by DTC in advance or not, allowing astute investors to confidently buy 49 shares after the March 19 press release. (Or one can assume that the ex-date is not done yet, unless FINRA has published the date in its website.) My wild guess is that the current delay in payment may be caused by the company arguing with DTC about this matter!

    1. ijw

      I wonder what will happen to my 49 shares then. They will be stuck in Limbo? I sold my other 50 shares too late probably. How does that even work for IB? I would own a fraction of one future share together with other holders who were too late or are not registered shareholders? So if we would decide on selling our share we would have to all meet up and try to come at an agreement for the right price? 😀 Or Parker simply cancels the split?

      They can’t simply reduce it to zero, can they?

      This is kind of amusing to watch. It is probably giving the people dealing with this a major head ache right now.

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