Opinion ID: 335321
Heading Depth: 2
Heading Rank: 1

Heading: Delisting of Missouri Stock.

Text: 14 Appellant first contends that Porter committed a violation of section 14(e) of the Williams Act by disclosing in its amended tender offer the possibility that Missouri stock could be delisted under published criteria of the New York Stock Exchange. 6 See 15 U.S.C. § 78n(e). In both its original and revised tender offer, Porter included the following disclosure statement: 15 Depending on the number of Shares tendered and purchased pursuant to this Offer, the Common Stock may no longer meet the requirements of the New York Stock Exchange for continued listing and may therefore be delisted. Published guidelines of the New York Stock Exchange indicate that the Exchange would consider delisting if the number of publicly held shares was less than 600,000 or if there were fewer than 1,200 holders of 100 or more shares (round lot holders) or if the market value of the publicly held shares did not exceed $5,000,000. At December 31, 1974, Missouri reported approximately 5,449 record holders of Common Stock. 16 Correspondingly, the New York Stock Exchange published guidelines with respect to the continued listing of a company's securities indicate that the Exchange would consider delisting (1) if the number of publicly held shares is less than 600,000; (2) if there are fewer than 1,200 holders of 100 shares or more; or (3) if the market value of publicly held shares does not exceed $5,000,000. The essence of appellant's contention is that the possibility of delisting is so remote as to constitute a materially misleading statement. Moreover, Missouri asserts that this disclosure wrongfully coerced its shareholders into tendering their shares by creating a fear of loss of liquidity and value which would result if delisting occurred. After the hearing on November 20, 1975, the district court found that delisting was a possibility and was sufficiently appreciable to require disclosure. 17 The Williams Act, 15 U.S.C. §§ 78l -78n, is founded on the principle that full and fair disclosure of all material facts must be made in connection with all tender offers so that investors may have the benefit of all significant facts in making their investment decisions. See, e. g., Ronson Corp. v. Liquifin Aktiengesellschaft, 483 F.2d 846, 848 (3d Cir. 1973), cert. denied, 419 U.S. 870, 95 S.Ct. 129, 42 L.Ed.2d 108 (1974); Chris-Craft Industries, Inc. v. Piper Aircraft Corp., 480 F.2d 341, 362-65 (2d Cir.), cert. denied, 414 U.S. 910, 94 S.Ct. 231, 38 L.Ed.2d 148 (1973). In particular, section 14(e) of the Act prohibits the making of any untrue statement of material fact or omission to state a material fact which renders a tender offer misleading. 15 U.S.C. § 78n(e). The applicable test for whether a misrepresentation is material is whether a reasonable investor might have considered information to be important in deciding whether to accept a tender offer. See Sonesta International Hotels Corp. v. Wellington Associates, 483 F.2d 247, 251 (9th Cir. 1973). See generally Mills v. Electric Autolite Co., 396 U.S. 375, 384, 90 S.Ct. 616, 621, 24 L.Ed.2d 593, 602 (1970); SEC v. Texas Gulf Sulphur Co., 401 F.2d 833, 849 (2d Cir. 1968), cert. denied, 394 U.S. 976, 89 S.Ct. 976, 22 L.Ed.2d 756 (1969). It is clear that a representation concerning delisting is of such importance as to be material. See Sonesta International Hotels Corp. v. Wellington Associates, supra, 483 F.2d at 251. The fundamental question in this particular case is whether the delisting disclosure made by Porter was a misrepresentation which rendered the tender offer misleading. 18 The record reveals that two of the three New York Stock Exchange listing criteria are inapplicable in the instant case. Thomas P. Luscher, general counsel for Porter, conceded that the number of publicly held Missouri shares would not be reduced below 600,000 if Porter acquired the 500,000 shares which it had offered to purchase. Similarly, Luscher admitted that the criterion that publicly held shares must exceed $5,000,000 was never really considered. In contrast, the remaining criterion for listing, while admittedly remote, was nevertheless considered by Porter as a possibility. The record indicates that approximately 80% of Missouri's 5,400 shareholders were holders of 200 to 250 shares or less. Accordingly, delisting of Missouri stock was a possibility since fewer than 1,200 holders of 100 shares could have remained if virtually all of the small shareholders in Missouri had tendered their shares in response to the Porter offer. In Sonesta International Hotels Corp. v. Wellington Associates, supra, 483 F.2d at 251-54, disclosure concerning the risk of delisting was required because the cumulative effect of a subsequent tender offer might have subjected the target company to delisting. In the instant case, delisting could conceivably have occurred even without the necessity of a cumulative effect from other tender offers. Consequently, appellant has not sustained its burden of showing a substantial probability that it would prevail in asserting misrepresentations by Porter as to the possibility of Missouri's stock being delisted. 19