Options bid by board is blocked
The board managed to secure a vote in favour of just over 73%, just below the 75% threshold required to secure passage of the measure.
The directors’ ability to issue new shares and dilute existing holdings is restricted. The company can still engineer a rights issue, but will not be able to place its shares with selected institutions. The vote is a sign that relations between management and the shareholders remains uneasy and new chairman Garo Armen has a job of work to persuade everyone to come on board.
Given the extraordinary catalogue of events which have resulted in a 96% slump in share price since the turn of the year, it has to be said that the shareholders at yesterday’s AGM displayed enormous restraint. The position was helped by skilful handling of the meeting by Mr Armen. He appeared well briefed without coming across as supercilious. He stressed that he personally had suffered considerable losses, having purchased significant tranches of shares at around the $50 level.
Mr Armen had to win the meeting around to the idea that generous options should be granted to managers.
Disillusionment with the performance of top management should not result in an attitude to the surviving executive team that could only result in the final coup de grace being administered to the shareholders’ investment as key managers departed in droves.
The chairman had to convey the sense of an operation where given the circumstances, business was being conducted as usual. Almost sounding like a psychoanalyst dealing with a client in deep mourning, Mr Armen identified what he called the company’s zone of potential, his vision for a new Elan operating as either a small, or medium sized entity, large enough to be viable, but slimmed down to allow for the realisation of assets necessary for the purposes of rebuilding the company’s battered balance sheet. Only time will tell whether Mr Armen’s brave vision will be blown away in a blizzard of further revelation by an unforgiving SEC.
