Genie Energy Refuses To Put Exchange Offer Back In Bottle

Genie Energy(GNE) is a company that we have followed from the announcement of its spinoff from IDT(IDT).  Last year, the company promoted an interesting exchange offer to allow holders to elect to trade their equity for high-coupon preferred stock with less upside from business performance.  The offer was met with little interest.

Undeterred, the company relaunched the exchange offer, on the same terms, in November.  Management framed it as though they needed to do it again to be fair to those shareholders who hadn’t had the opportunity to tender previously.

Ira Greenstein, President of Genie, said, “We recently offered our stockholders the opportunity to exchange shares of our Class B Common Stock for Preferred Stock, which provides a senior dividend right and priority on distributions with less participation in the future growth of our businesses. We want to ensure that all interested stockholders have the opportunity to participate, and are launching a new offer on the same terms covering those shares not taken up in the prior offer.”

Howard Jonas, Chairman of Genie, added, “Our Preferred Stock is a very different security than our Class B Common Stock. It provides holders with a healthy dividend yield that is supported by our strong balance sheet and operations, particularly our retail energy provider business. We believe that our Preferred Stock, with a robust trading market on the NYSE, can serve as a potential financing vehicle, and can also be used as currency in exploiting various opportunities. First and foremost, we must be fair to our current stockholders and allow them the opportunity to choose the type of security they wish to hold. Regardless of whether you are a common or preferred holder, you will benefit from the synergies of our two operating segments and the excellent management and scientific teams at Genie.”

The offer, which was launched on November 15, 2012, was set to expire on January 15, 2013. On the January 15, the company extended the offer until February 6, 2013.  It also disclosed that a mere 118,484 shares were tendered, though the company was willing to exchange up to 7,145,409 shares.  Either shareholders are completely apathetic, or else they just don’t find this offer attractive.  As if to remind shareholders of the value of the preferred, Genie issued a press release on January 16, 2013, declaring a preferred dividend of $0.1317 per share.  We fail to see, however, how repeated extensions of the same offer will yield any bounty of shares.

Disclosure: The author holds no position in any stock mentioned

One thought on “Genie Energy Refuses To Put Exchange Offer Back In Bottle

  1. Vijay Singal

    Perhaps, there was uncertainty about dividends last year. I will take a closer look at it – thank you for pointing it out in this space.

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