Sadly, CSCX has been taken over, or rather, taken-under, by an Indian company. Normally, the majority shareholders would object to such a take-under, but in this case, there is no dominant shareholder, and management stands to gain more from cashing in on their change of control agreements than hanging on. Both the board of directors and the management are saying that under some scenarios, it is possible that the company will run out of cash in 2011. Management and the BOD have approximately 15% of the company, so therefore the merger will require the approval of at least some of the institutional shareholders to cross the 60% threshold. However, it is difficult to fight the management when it comes to a merger. At minimum, it can be assumed that management will be demoralized if the merger collapses.
However, for myself, as a minority shareholder, I have no choice but to sell out at the take-over price. The risk-reward is very skewed in this situation. If the merger goes through, I will receive the take-over price, which is pennies above the current price. If not, the stock will probably go back to where it was trading before, or worse. So, the best case scenario for me is that I get to sell the stock now, and then buy it back when the merger fails. However, the most probable scenario is that the merger goes through, given that it is supported by both management and the board of directors. The fact that the market price for CSCX is now pennies below the take-over price indicates that merger arbitrageurs concur that the merger is most likely to be completed. After a roller-coaster ride, and despite the strong underlying business that the company possess, it looks like my investment in this company will terminate with a measly 10% gain after a roller coaster ride.
I have no position in CSCX.
