eSpeed Inc. (NDAQ:ESPD) shares moved down 7.66% today after the company released a statement saying that it sent a letter on April 19, 2007 to Terry Smith of Tullett Prebon plc stating that the board of directors has been formed by its controlling stockholder, Cantor Fitzgerald, that it is not interested in selling its controlling interest in the company to Tullett, in terminating its arrangements with eSpeed on terms proposed by Tullett in recent letters, or in proposing alternative terms to Tullett. More, the company said it is not in a position to pursue Tullett's acquisition proposal because such a proposal cannot be consummated without the consent of Cantor Fitzgerald - the company's controlling stockholder.
The company also commented on other demands made by activist shareholders. They stated that they cannot take any of the following actions without Cantor's express approval: (1) convert Cantor's Class B common shares into Class A common shares, (2) undertake any business combination with another entity, or (3) terminate the perpetual clearing, technology and other arrangements with Cantor and its affiliate BGC Partners. While the board is fully aware of its fudiciary duties, it has determined that it is unable to do anything without Cantor's approval. This leaves few alternatives for activist investors who continue to hold large stakes in the company, including WC Capital and Chapman Capital. They can put additional materials on the proxy, but with Cantor controlling the majority of the votes, it will be very difficult to make any meaningful changes. At this point, all shareholders can do is
wait for a response from the hedge funds or perhaps another higher offer by Tullett that would be high enough for Cantor to consider.
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