It seems there was more than meets the eye behind the sudden stock buyback offer extended Sunday night by Zoko Enterprises, which lifted its price 25% in Monday trading.
The company later announced it had been slapped by a class action on behalf of public shareholders the previous day.
With just 5.2% of its shares in public hands, Zoko has been on the Tel Aviv Stock Exchange's maintenance list since July 2010 and stood to be delisted altogether in two months. The remaining voting shares are split between chairman Sir Bernard Schreier with 66.6%, Yoav Harlap with 20.2% and CEO Yossi Smira with 8%. Zoko imports, markets and services heavy industrial and earthmoving equipment.
The request for approval of the class action against the company, its directors and major stakeholders was filed in court Sunday by attorney Oded Goldstein at the initiative of minority shareholder Livnat Weizmann, who estimated the damage caused by limitations on the stock's marketability, by virtue of being on the maintenance list, at at least NIS 12 million.
Arguing that the respondents deprived minority shareholders of their rights, violating their duty to act properly and in good faith by not taking sufficient action to prevent the stock's placement on the maintenance list, Weizmann filed a petitioned requesting the respondents either take the necessary steps to restore regular trading or buy the public's holdings at an agreed upon price.
She also asked to be compensated by the respondents as lead plaintiff and asked that they assume all legal costs.
Weizmann claims that Schreier and Harlap appear to have conspired in keeping the company on the maintenance list, with the intention of having it delisted from trading altogether and taking the company private.
Goldstein pointed to an Israel Securities Authority position paper from July 2008 stating that being placed on the maintenance list could impact a security's price due to concern about its tradability, and that a stakeholder might have an interest in causing such an effect - if he plans to make a purchase offer, for example.
Goldstein said that, in its position paper, the authority required companies to state what action they intend to take in order to avoid being transferred from normal trading to the maintenance list, where trading takes place for just several minutes a day, or which steps will be taken to return it to regular trading.
According to Goldstein, Zoko wrote in its 2011 financial statements, published at the end of March, "As of this date, neither the company nor the controlling shareholders, to the best of its knowledge, have reached any decision whatsoever on taking action to fulfill the conditions for the renewal of trading on the main list."
In other words, the company admitted four months before it was due to be completely delisted from trading that, for two years, nothing was done by its controlling owners or directors to restore Zoko shares to normal trading.
From his phone conversations with company stakeholders, Goldstein concluded that they hadn't succeeded in reaching an agreement even among themselves on the steps necessary to regularize trading of the company's shares, and consequently that they aren't doing anything to resolve the matter.
The company's buyback offer for its publicly held shares was set at NIS 8.85 per share, in precise proportion to its capital equity as reported at the end of the first quarter, at a total cost of NIS 9.8 million. This reflects a 45% premium over the stock's average price during the six months prior to the announcement.
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