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Technology Stocks : Merant - MRNT (formerly MIFGY) -- Ignore unavailable to you. Want to Upgrade?

To: Ian Burton who wrote (332)	12/9/1998 11:46:00 AM
From: Mike Healy	Read Replies (1) \| Respond to of 461

Ian, I wish I knew how to quantify it. I have seen (and owned, to my dismay) a fair number of these situations. So I have formed an impression... Generally, the stocks are weighed down quite significantly for a while due to uncertainty over the extent of the loot the company will have to cough up. It takes time for the "attorneys" to assess the amount of "damages" their "clients" have incurred. Once they have done this, the amount claimed/demanded in the suits should be revealed. Unless its a nightmare (ie. legitimate and provable fraud by mgmt -- relatively uncommon), the suit will ultimately be settled (so that mgmt can get on with life) for a fraction of the amt claimed. But this can take as much as a year or two. Often, the amount paid out to the class-action crooks takes the form of stock or warrants (ie. the honest shareholders get diluted). If the case is horrible, the attorneys might get a little cash and the pigeons will get a Micro Focus tee shirt. Usually, mgmt will settle for a reasonable chunk of change just to get on with life. It has been my experience that, in this country, mgmt is actually not overly distracted by these suits since they are so common. There are problable generic play-by-play manuals that even an in-house counsel can follow in defending the suits. If the suit looks contentious and mgmt is indignant and wants to fight the crooks, they may decide to take a charge for legal costs incurred or anticipated..but I think this is rare. I dont think companies EVER take a provision for a contingent legal liability under these suits since this can send a bad (weak) message to the market and it will whet the appetites of the crooks. We will know the amount of the settlement when it is agreed, with little information before. Within a month or two, however, Gary or the CFO (forget his name) should be able to give us their impression of how it will be resolved. I would tend to trust the information Gary shares when this happens. Here's a wild gut-feeling no-basis guess: Company pays out $10MM in two years and incurs $1mm in legal fees (assumes there is some ambiguous "evidence" about whether Martin knew about Y2K sales force attrition before the merger and whether he/they thought it could materially affect the stock). Martin, of course, will pay nothing. The market cap if MIFGY will be held back by a far greater amount until more is known. For what its worth...