ADA, Okla., March 3 /PRNewswire-FirstCall/ -- Pre-Paid Legal Services, Inc. announced today that effective April 2, 2010, its founder and current Chief Executive Officer, President and Chairman of the Board, Mr. Harland C. Stonecipher, 71, will relinquish the title and responsibilities of Chief Executive Officer and President. At the suggestion of Mr. Stonecipher, the Board of Directors unanimously approved that the title and responsibilities of Chief Executive Officer will be shared equally by two co-CEOs - Randy Harp, 54, Pre-Paid's current Chief Operating Officer, and Mark Brown, 56, Pre-Paid's current Chief Marketing Officer. The Board also named Mr. Harp as Pre-Paid's President.
Hat tip to Fil from Minyanville, who adds:
Chariman, CEO and founder H. Stonecipher is relinquishing his CEO position effective April 2. Meanwhile, Thomas Smith, the largest shareholder in the company (25.7%), stepped down from the Board of Director effective last Tuesday.
Now, Stonecipher is in his 70's and Smith is past 80, so retirement would not be out of the ordinary. However, I would point out the following:
. "an event of default occurs if Harland Stonecipher ceases to be our
Chairman and Chief Executive Officer for a period of 120 days unless replaced with a person approved by Wells Fargo." (PPD 10-K).
. Our success depends substantially on the continued active
participation of our principal executive officer, Harland C. Stonecipher.
Although our management of the services of Mr. Stonecipher could have a material adverse effect on our financial condition and results of operations. (PPD 10-K).
I have no basis to believe that the replacement CEOs were not approved by Wells Fargo (WFC), so I am operating under the assumption that Stonecipher's departure will not constitute an event of default. Nonetheless, I will take PPD 10-K's words at face value and assume that his action could have a material adverse effect on PPD's financial condition and results of operations.
But what's far more interesting in this story, is a Paragraph from a 13D/A also filed last evening. Here are the noteworthy parts:
"(a) Based on the 10,045,068 shares of Common Stock reported as outstanding as of February 12, 2010, the aggregate number and percentage of shares of Common Stock beneficially owned by each of the Reporting Persons is as
follows: Mr. Smith - 2,579,115 shares (25.7%); Mr. Vassalluzzo - 1,629,515 shares (16.2%); Mr. Fischer - 1,544,415 shares (15.4%); Idoya Partners -
488,434 shares (4.9%); and Prescott Associates - 1,014,675 shares (10.1%).
[Writer's embellishment: this totals to about 7.255M shares out of the 10M outstanding]
[Reggie's comments: It is no wonder how this stock is potentially manipulated. A very small group of insiders control 73% of the public float, with the balance trading on very thin volume. My analysis in the past has made it clear that the company allows management to sell shares into company buyback programs, which effectively "manages" the share price in conjunction with allowing management to bail!]
The Reporting Persons are re-evaluating their position in the Company and expect to engage in open market sales, including sales made pursuant to Rule 144, and to consider other strategic transactions, which could involve a disposition of some or all of their shares. Any actions taken by the Reporting Persons will be dependent upon market conditions, the evaluation of alternative investments and such other factors as may be considered relevant. Based on such factors, the Reporting Persons may also purchase Common Stock from time to time on terms considered desirable by the Reporting Persons. In addition, the Reporting Persons may talk or hold discussions with various parties, including, but not limited to, the Issuer's management, its board of directors, and other shareholders and third parties, for the purpose of developing and implementing strategies to maximize shareholder value, including strategies that may, in the future, result in the occurrence of one or more of the actions or events enumerated in clauses (a) through (j) of Item 4 of Schedule 13D.
Subject to the foregoing, none of the Reporting Persons has any present plan or proposal which relates to or would result in any of the actions or events enumerated in clauses (a) through (j) of Item 4 of Schedule 13D. (PPD's Form SC 13D/A filed on 3/32010 - Emphasis added)
The language about "re-evaluating their position in the Company . . . " did not appear in the prior 13D/A filing. And Smith and his partners in Prescott have owned PPD stocks for years on end.
So to recap: PPD is the subject of an SEC inquiry into some very relevant portions of its business; its CEO retires; and on the same day the largest sharehodling group lets it be known that they may unload their shares.
As Toddo would say - the quack count is high.
For those who have not been following my comments on this company, see:
- First PPD Gets SEC'd, Then it Gets FTC'd. It Seems to be a Bad Year for Ponzi Schemes.
- The Flim Flam Scam gets SEC'd - I'm not going to say I told you so, again!
- Flim, Flam, Scam: Would a PPD Ponzi and Pyramid scheme cause your wealth to Scram?
- A Demonstration of How PPD Management is Destroying the Company
- Additional Commentary on PPD
- Reggie Middleton's Continued Public Service Announcement on the Flim Flam Scam
- PPD 2009 First Quarter Update and Comment
- A quick opinion on PPD's latest earnings release