Books A Million (BAMM) -- Clyde Anderson recently announced his intention to buyout the outside shareholders of Books A Million for less than 50% of that firm's tangible book value. In our view, Mr. Anderson is trying to buy a dollar for fifty cents. This is all well and good (after all I'm a value investor!), except that he is buying out his own company at a significant discount to intrinsic value and is in essence stealing $60MM of shareholder wealth from outside stockholders if you believe that the financial statements of BAMM are accurate.
In our view, this "take under" is the worst form of corporate malfeasance and corruption -- corporate managers are supposed to work for their shareholder, not strictly for their own financial benefit. It would seem that Books A Million management, after assuming 13 Borders leases and aggressively moving their business forward, wants the investment community to hold the bag while management dines out at Wolinsky's on the shareholder's dime. "Take unders" (when management acts to depress their stock price and buy the company out on the cheap) are a big problem in the small cap value arena and show that there is no real SEC at all anymore -- managers are financially raping their shareholders. There truly is no justice in the small cap value market.
Chesapeake (CHK) -- Aubrey Mclendon is another manager who seems to be placing his interests in front of the interests of CHK shareholders. Mclendon received a $75MM bonus after having to sell his stock due to a margin call in 2008 which we could look past given that CHK is a big company with a long history of success for investors. At some point, however, Mclendon's own interests seemed to have blinded him from his duties towards his outside shareholders.
Recently, the SEC has begun investigating Mclendon's activities as CEO of Chesapeake. Apparently, Mclendon negotiated a 1.1 Billion Dollar loan to finance his personal participation into wells owned by Chesapeake. He some negotiated a personal 2.5% stake in each well owned by CHK which seems like a completely egregious conflict of interest. Placing his own interests in front of the interests of shareholders in this manner is a clear violation of his fiduciary duties to his shareholders in our view.