Looking for value in the overlooked margins of the market.
The board of directors of a Delaware corporation has a fundamental duty and obligation to “protect the corporation enterprise,” and to defend stockholders “from harm reasonably perceived, irrespective of its source.” This case involves a board that is purposely letting half of its members – including the known repeat fraudster who founded the company – buy a controlling stake in the company through open market purchases at depressed prices, without paying a fair price, much less a control premium. Instead of adopting a poison pill or taking other defensive measures to protect public stockholders in the face of a change of control transaction executed in the open market, this board helped turn a slowly developing creeping takeover into a modern street sweep.The company is temporarily enjoined from deregistering, and some think that the stock is interesting at the current price. The complaint filed in Delaware court is posted below.
This morning, Wednesday, November 20, 2019, Enterprise Diversified, Inc. (the “Company”) filed a verified complaint in the Court of Chancery of the State of Delaware commencing a civil action against Woodmont Lexington, LLC, a Delaware limited liability company (“Woodmont”).The LLC agreement between Woodmont Lexington, LLC and Enterprise Diversified, Inc. is available as an exhibit here. And here is the most recent investor presentation of ENDI, from November 14th.
As previously reported in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 3, 2019, the Company had sold to Woodmont, on June 27, 2019, 65% of the Company’s membership interest in Mt Melrose, LLC, a Delaware limited liability company (“Mt Melrose”), which, as has been previously reported, owns and operates a portfolio of income-producing real estate in Lexington, Kentucky. Since the closing of the Mt Melrose transaction, Woodmont, by its representative, Tice Brown, has made repeated offers to buy out the Company’s remaining interest in Mt Melrose. Woodmont’s most recent offer was received by the Company, in writing, on November 11, 2019, with a deadline for acceptance of 9:00 a.m. Monday, November 18, 2019. All such offers have been rejected or not responded to by the Company, as being unfavorable, undesirable and not in the long-term best interests of the Company and its shareholders.
The present action was filed by the Company in response to repeated claims and demands and injurious conduct by Woodmont and its representative, Tice Brown. The Company is seeking, among other relief available, injunctive, declaratory and equitable relief against Woodmont, along with attorneys’ fees and expenses.
