What follows responds to a message on the Yahoo board for IMNR and is posted here, as well, for those who may be interested in the representations made in Yahoo posting #2443 (quoted, beneath) which raised considerable comment.
As promised over the weekend, the following has been sent to the SEC which will send some sort of answer in due course. When received I will post it to this Yahoo Board and to Silicone Investor for IMNR.
Securities and Exchange Commission
Investor Education and Assistance
SUBJECT: Alleged "9-K" and "retroactive open market share split"
Ladies and gentlemen:
Reference is made to a posting on the Immune Response Corporation (IMNR) board, message #2443, which is quoted beneath. It has raised a flurry of comments and rather than guess, I would prefer to raise my questions directly with your agency for accurate and reliable answers.
1. Is there such a phenomenon as a "retroactive open market share split"?
2. If there is, and if you can express an opinion, why would a company undertake this convoluted route in lieu of selling treasury shares that have been purchased in the open market and which, through such purchases, are fully registered?
3. Also, if a "retroactive open market share split" exists, is there a regulatory paragraph that applies, and what is its number?
4. Is there such a thing as a "9-K"?
5. If there is, which regulation(s) apply?
6. If "9-K" filings exist, could you please identify some companies that have filed so one can see examples of this form? If not available on EDGAR, then how can one obtain copies?
7. Any relevant comments regarding this inquiry would also be appreciated.
Any answers you are kind enough to furnish will be posted to the above reference Yahoo IMNR board and to the IMNR board on Silicone Investor. In the event the above questions are not ones that your division is permitted to answer, would you kindly forward this request to your Freedom of Information Officer to handle.
Respectfully,
(Details withheld)
QUOTED YAHOO POSTING REFERRED TO, ABOVE:
This split has not yet been announced by the company. But I have been informed by sources close to the company that they have decided to perform what is termed as a "retroactive open market share split" (or "retro-split" by Wall Streeters) by some of the major investment banks as Goldman Sachs and Morgan Stanley. It is a cutting edge strategy that has been devised by companies that have had their stock under seige by short sellers. It was only permitted on American Exchange stocks with market caps of less than $500M until recently, when it finally approved for NASDAQ issues. In addition to the obvious corporate benefits, one of the original intents was to increase interest and volume on the ASE & NASDAQ.
The way it works is the shares are driven down through open market dumping of treasury shares by the company at a time when short selling appears at a peak (also called "treasury draining"). The American Exchange or NASDAQ specialist is required to perform such transactions as "off-book transactions" to keep the activity from public view and to maintain the security of the event.
The SEC has instituted a reporting procedure with a new form 9-K in 1998. A private filing of Form 9-K must be made and the retro-split must take place within 6 months of the private filing. Within the 6 month time frame the company must publicly disclose by press release that the 9-K has been filed and the degree of the actual split.
At the time of the public disclosure the company is authorized to buy back the shares and deliver them as they have stated in their 9-K private filing (eg, 3:2, 3:1, 5:1). Since this is a new procedure strategized by the major investment banks, the data gathered is miniscule on the significant move up in stock price that should be experienced at the date of announcement.
A tell-tale sign that the private 9-K transaction is evolving is what is called an "8-K/9-K arbitrage". A company will announce a "stock repurchase program" through an 8-K filing. This is a classic symptom of the underlying private 9-K taking place.
My sources tell me that the company has indeed privately filed a 9-K for the 5 for 1 retro-split.
The major positive effects upon announcement on the market values of shareowners is obvious. But what has been the substance of heated debate within the SEC is the fact that profits are, by regulation, retroactively extracted from short sellers within this 6 month period. In other words, in this case, should a short seller have taken his initial position sold short at say, 19, and covered at say 14, he is only entitled to 1/5 or 20% of the perceived profit. That is, under the 1998 amendment to SEC Regulation T, in this case that short seller would only be entitled to 1.0 points of his perceived 5 point profit. If there are any short sellers whose accounts have been tagged by the Reorg Department of their brokerage house, please let me know. Typically, a capital "R/S" will be placed next to the stock position on the statement even though it has been closed out. Your SMA balance will not be as large as you expected until the completion of the retro-split. If you have this, then it will confirm my information.
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