In the past two months while I have been working on getting our business started I pretty much blacked out everything investing related. I did this for three reason; so I wouldn’t be tempted to go back to researching companies because that is where my heart lies, so I could concentrate on getting the business going, and because I needed to take a break physically from the amount of work I was doing.
In the past week or so I have been going over the companies I have written articles on, especially the ones I am interested in or own, to see if I have missed any news in the past two months that is very important and it looks like I have with Bab Inc (BABB.)
My recent article series on them, part 1 and the conclusion, laid out how overall I thought BABB was a very interesting company and how I would love to invest in the company, and possibly becoming activist in the company to help fix its major problem of overly excessive executive pay and overall excessive payroll in my opinion. In my opinion this is the only major problem with the company and if executive pay and overall payroll was lowered it would help raise the companies earnings and cash flow, and would most likely help to unlock the underlying value of the company that I see beneath the excessive pay.
When looking back to see if I missed anything on the companies I am interested in I found this link. Since I do not believe in coincidences, apparently BABB management noticed my article somewhere or were threatened by another investor, and have decided to adopt a “Stockholder’s Rights Plan.” This allows the company to issue rights to current shareholders in the event that someone buys 15% of its shares (20% in the case of an institution) to “Protect Shareholders best interests” from outside investors. These rights would be issued to shareholders as of May 13th if someone were to purchase 15 or 20% of BABB and look to essentially be a way to keep people from making too much noise about change at the company.
There is also this line from the announcement:
BAB’s Board of Directors may redeem the Rights for $0.001 per Right at any time before an event that causes the Rights to become exercisable. The Rights will expire on the third anniversary date of the Agreement, unless the Rights have previously been redeemed by the Board of Directors.
This gives a further advantage to insiders over regular shareholders and is again put in there to keep outside investors from making changes in the company, and is completely ridiculous in my opinion.
It looks to me that current BABB management likes the status quo of taking giant payrolls, losing market share, and losing restaurant counts and does not want to have things shaken up by outside investors who may want to lower overall pay, help the company become more profitable, and help the company potentially grow again.
This is my first experience with a company doing something like this and I knew it would eventually happen because of how most nano caps are managed by only a small number of individuals who control the company. It is still surprising and disappointing that they would do something like this, but apparently they would rather just keep milking the company instead of putting some of that excessive pay towards growing the company or growing earnings and cash flow. Suffice it to say that I am glad I did not buy into BABB as this shows that in my opinion management does not care about the best interests of shareholders.
This does make me want to buy into the company though to change things even more for the betterment of all shareholders and not just the few at the top of the pyramid, maybe I will at some point.