Yesterday was the record date for the first dividend in the liquidation of Leadis Technology Inc. (OTCPK:LDIS). The dividend is likely to be approximately $0.93 per share. The board estimates that “if we are able to dispose of substantially all of our non-cash assets, the aggregate amount of all liquidating distributions that will be paid to stockholders will be in the range of approximately $0.93 to $1.20 per share of Leadis common stock.” After the initial $0.93 dividend, the remaining dividends will be in the range of nil to $0.27 ($1.20 less $0.93). LDIS closed yesterday at $0.99. If the stub starts trading tomorrow at $0.06 ($0.99 less $0.93), it becomes an interesting security offering the potential for some substantial upside.
The definitive proxy filings have the detail:
How much can stockholders expect to receive if the Plan of Dissolution is approved at the special meeting?
At this time, we cannot predict with certainty the amount of any liquidating distributions to our stockholders. However, based on information currently available to us, assuming, among other things, no unanticipated actual or contingent liabilities, we estimate that over time stockholders will receive one or more distributions that in the aggregate range from approximately $0.93 to $1.20 per share. This range of estimated distributions represents our estimate of the amount to be distributed to stockholders during the liquidation, but does not represent the minimum or maximum distribution amount. Actual distributions could be higher or lower.
This estimated range is based upon, among other things, the fact that as of August 31, 2009, we had approximately $28.6 million in cash, cash equivalents, restricted cash equivalents and short-term and non-current investments. In addition, subsequent to August 31, 2009, we received approximately $3.2 million in connection with the sale of certain assets to IXYS Corporation. We expect to use cash of approximately $2.3 million to satisfy liabilities on our unaudited balance sheet after August 31, 2009. In addition to converting our remaining non-cash assets to cash and satisfying the liabilities currently on our balance sheet, we have used and anticipate using cash for a number of items, including but not limited to: satisfying capital leases and other contractual commitments. In addition to the satisfaction of our liabilities, we have used and anticipate continuing to use cash in the next several months for a number of items, including, but not limited to, the following:
• ongoing operating expenses;
• expenses incurred in connection with extending our directors’ and officers’ insurance coverage;
• expenses incurred in connection with the liquidation and dissolution process;
• severance and related costs;
• resolution of pending and potential claims, assessments and obligations; and
• professional, legal, consulting and accounting fees.
We are unable at this time to predict the ultimate amount of our liabilities because the settlement of our existing liabilities could cost more than we anticipate and we may incur additional liabilities arising out of contingent claims that have not been quantified, are not yet reflected as liabilities on our balance sheet and have not been included in the estimated range of potential distributions, such as liabilities relating to claims that have not been resolved and claims or lawsuits that could be brought against us in the future. If any payments are made with respect to the foregoing, the estimated range of distributions to stockholders will be negatively impacted and less than estimated. If the ultimate amount of our liabilities is greater than what we anticipate, the distribution to our stockholders may be substantially lower than anticipated. Therefore, we are unable at this time to predict the precise nature, amount and timing of any distributions due in part to our inability to predict the ultimate amount of our liabilities. Accordingly, you will not know the exact amount of any liquidating distributions you may receive as a result of the Plan of Dissolution when you vote on the proposal to approve the Plan of Dissolution. You may receive substantially less than the low end of the current estimate.
For some further background, see Shake&Bake’s take on LDIS.
Full Disclosure: We have a holding in LDIS. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only. Do your own research before investing in any security.