Tier Technology, Inc. (OTC:TIER) may find itself in hot water soon after 9% holder Giant Investments LLC recommended that the company put itself up for sale in a Schedule 13D filing with the SEC. The hedge fund reasoned that the company lacked the necessary scale to continue as an independent public company - that is, the expenses of being public represented a large percentage of their income. Consequently, the company's value would be unlocked if it were able to find a suitor that would be able to lower these costs with economies of scale. This idea of hidden value through excessive costs of being a public company is extremely common in the OTC markets, and many large hedge funds are able to successfully execute their plans due to the limited liquidity and small market caps (making for an easier sale).

Interestingly, Giant also requested that the company sign a confidentiality agreement with them to evaluate strategic alternatives involving themselves or their affiliates. This implies that the hedge fund knows of parties that may be interested in acquiring the business, which is certainly a positive sign for shareholders. Meanwhile, they maintained that their primary interest is to have the value of the common stock maximized, regardless of whether or not their affiliates are involved. To seal the deal, Giant nominated their own Jim Stone to the company's board to assist in the process, saying they believe that Jim Stone would be a strong asset to Tier as a member of its Board of Directors and help shareholders maximize the value of their investment. This election is set to take place on February 28th of this year. Combined, these factors make TIER a stock that is definitely worth watching over the next few months!

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