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Technology Stocks : MRV Communications (MRVC) opinions?
MRVC 9.975-0.1%Aug 15 5:00 PM EST
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To: J. Conley who wrote (10087)8/18/1998 9:50:00 PM
From: Andy H   of 42804
 
The preferred stock is a standard provision to put in when incorporating, particularly when setting up the capitalization prior to going public. I'm confident that no specific use for the preferred was in mind when it was put into the Certificate of Incorporation. When clients ask why the preferred stock provision is included, we tell them that the preferred is there for "flexibility" for acquisitions or other financings.

Due to fiduciary duties, the board could not issue the preferred at a bargain price to thwart an unwanted tender offer. Example: Tender offer comes in at $35/share, giving MRVC a value of over $1 billion. The Board could not issued preferred representing shares that could control the company without finding a real buyer willing to pay a similar valuation-over $500 million for one-half of the company. The preferred could be part of a poison pill vehicle to discourage hostile takeovers-I don't recall if one has been adopted by MRVC.
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