Recently, the news that a settlement was pending in a series of class-action lawsuits filed against the Nortel Networks (NYSE: NT) by its shareholders, as the company indicated that it would:
- Pay shareholders $575 million in cash, and
- Issue 628.7 million new shares of its stock (about 14.5% of the amount of stock currently issued) worth nearly $1.9 billion.
Altogether, the company would pay nearly $2.5 billion USD for the purpose of putting a massive accounting scandal that had taken place under the watch of previous management behind it.
Sounds like a huge payout for the shareholders who filed the suit, right?
Well, maybe not. Yahoo! Finance's NT message board poster abcsofhealth did some math:
All the shareholders of record; 4.33 bil get and equal cut of the TOTAL payout ~ 2.7 bil.
That translates to APPROX. $.62 PER SHARE. Oh, Better deduct the APPROX. 27 % lawyer payout first , that brings it down to APPROX. $.46 PER SHARE.
Oh, better factor in the 14.5 % dilution factor. Lets see with NT at approx. $3.00 per share IF THE MKT deducts this; THATS APPROX. $.44.
Lets see WHATS LEFT; $.46 - $.44 = $.02 per share.
LETS SUM IT UP:
THE LAWYERS GET RICH
THE TEACHERS FUND MANAGER GETS A LARGE RAISE
THE COMPANY IS DAMAGED
and the shareholders are lucky to get TWO CENTS.
But that's not the best part of abcsofhealth's commentary. Continuing...
These type of lawsuits are NOT in the shareholders interest NO MATTER HOW YOU BREAK IT DOWN.
PS. If shareholders own the company; the MORONS sued themselves AND OF COURSE lost. IF THERE WAS NO SUIT; NT WOULD BE A COUPLE OF BUCKS HIGHER AND IN A STRONGER POSITION GOING FORWARD.
Gotta give credit to the lawyers and upper fund managers that convinced these IDIOTS to file a lawsuit. I can just see it;
THIS ISN'T RIGHT we got to get that NT, the lawyers stated and the morons rise up in ANGER, ya get them nogoods. Later the lawyer meets with his buddie the fund manager and laughs his butt off at the sheer stupidity before going to the bank of course with his retainer.
Gosh! Almost sounds like politics (only the names of the rent-seeking parties have been changed....)
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