Curiouser and curiouser …

So we all “know” the prospective fate of SGI … assets to be sold for a song to Rackable, employees let go … equity shareholders left holding effectively nothing.

Whats odd is that outstanding equity shares haven’t been canceled yet. At some point, this suggests that there will be an exchange … X SGIC shares for 1 share of RACK.

But thats not the curious thing.

This is.


Last friday, an order was was entered which gave effective veto power to SGIC for any sale of equity over a very specific amount.

Specifically

Under the terms of the Order, among other things, any person or entity that beneficially owns 553,000 or more shares of the Company’s common stock (a “Substantial Shareholder”) must file advance written notice with the Court and the Company prior to increasing or decreasing the amount of the Company’s common stock that the Substantial Shareholder beneficially owns. Upon receipt of this notice, the Company shall have 30 calendar days to file an objection to the transfer of shares with the Court. If the Company does not file an objection within this 30-day period, the Substantial Shareholder may proceed with the transfer. If an objection is filed, the transfer will not be effective unless approved by a final and nonappealable order from the Court. The Company may file an objection only on the grounds that the transfer will adversely affect the Company’s ability to preserve their net operating losses or certain other tax attributes.

Not sure if this is normal. This does seem to suggest that SGIC holds an effective veto over sales which would compromise its ability to preserve a net operating loss.

Apart from keeping it from paying income taxes, why would they want to do this?

I am missing something here.

Curious.

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