Payout on Stetson’s preferred shares still unknown© Todd Korol / Reuters/Reuters
Investors who hold Stetson Oil and Gas Ltd. preferred shares will have to wait a little while longer before they know the size of the special payout on these securities.
In 2008, Stetson issued 85 million prefs to existing common shareholders, promising to give the owners "the proceeds of any non-appealable judgment or settlement monies" earned in connection with its lawsuit against Thomas Weisel.
The lawsuit stemmed from a bought deal during the summer of 2008, when Stetson, which had just a $6-million market value at the time, tried to raise $25-million to lease some assets. Thomas Weisel agreed to underwrite the offering, but a few weeks after it launched the dealer pulled out of its commitment to buy the shares from Stetson and resell them to the market.
The decision put Stetson in a tough spot, and the company ultimately had to raise $10-million with the help of other investment dealers. At the same time, the company announced it would issue the new class of preferred shares.
On Monday, nearly five years after the original event, a judge awarded Stetson $16-million, payable by Stifel Financial Corp., the investment bank that bought Thomas Weisel. Should Stifel's appeal be turned down, the preferred shareholders are expected to be entitled to some of this money.
However, a spokesperson for Stetson said that there's no decision on the fate of the payout at this time, and the company 's board of directors "will ultimately decide how much is distributed."
Despite this uncertainty, the ruling made one thing very clear: underwriters must stick to their word and purchase the shares they've agreed to buy and then resell through a bought deal offering.
Stetson received legal advice from Cassel Brock & Blackwell LLP throughout the process.
Tim Kiladze