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Where Are The 'B' Class Shares?

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Fri May 04, 2007 11:41 am PostPost subject: Where Are The 'B' Class Shares?
Thicket
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Joined: 09 Apr 2007
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Topic: Where are the ‘B’ Class Shares?

Steorn is authorized to issue three classes of shares.
• Ordinary
• Ordinary ‘A’
• Ordinary ‘B’

The vast majority of Steorn shares issued are ‘Ordinary’. Shareholders get one vote per share held.

About 2.7% of Steorn shares are ‘Ordinary A’. These are the ‘Business Expansion Scheme’ shares. Holders of ‘A’ shares also get to vote.

There are either some or no ‘Ordinary B’ Steorn shares depending on which filed financial statements you believe. ‘B’ shares have no voting rights.

Imagine that you are Sean McCarthy and Michael Daly. You own about 60% of Steorn shares, and are in control of everything at Steorn, including your own compensation. You continue to get money from investors by selling shares in Steorn. These additional shares will dilute your own ownership in Steorn, perhaps to the point of losing control. What do you do?

There are a number of easy options.

You can buy more shares yourself, but you certainly don’t want to pay the price paid by current investors. Current investors are paying over 1000 Euros per share, while you bought your shares for 1 Euro cent per share.

Alternatively, you can include shares as part of your compensation. (Note: This approach is not the common practice of issuing stock options to executives.)

A good way of selling shares, but avoiding share dilution is to issue ‘Ordinary B’ shares. Unlike other shareholders, “Ordinary B” shareholders cannot vote.

From the 2005 audited Financial Statements for the year ending December 31, 2005, Steorn first started to issue Class B, non-voting shares.

Quote
During the year the company raised… 336 ‘B’ ordinary shares. The subscription for the ‘B’ ordinary shares was not received until after year end.
Unquote

Strangely enough, in the Annual Return made up to September 30, 2006, these ‘B’ shares don’t show up despite the passing of nine additional months! The ‘Ordinary’ and the ‘Ordinary – A’ shares are shown, but not the 336 ‘Ordinary - B’ shares. What happened, Sean? This seems like another financial statement screw-up?

The discrepancy is NOT because shares were issued and then sold. The Annual Return clearly spells this out.

Quote
Persons holding shares on the date to which the annual return has been up for 2006 and of persons who have held shares therein at any time since the date of the last return…
End Quote

The Annual Return was made up to September 30, 2006 and the date of the last Annual Return was made up to September 30, 2005.
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