Syms Corp. (OTC: SYM), which delisted its stock in mid-January and plans to deregister tits shares in April, may find itself in court with two activist shareholders as a result. Barington Capital and Esopus Creek Advisors, who collectively own 9.8 percent of the company, sued Syms alleging that its directors broke their fiduciary duty to investors by enabling the company to delist. The activists are also seeking a copy of the company’s shareholder list, presumably to see if others are interested in joining the lawsuit.

“The group believes that such actions will destroy shareholder value,” said Barington and Esopus in a letter to the board. “Since the Company announced on December 21, 2007 that it was delisting and deregistering its shares, the price of Syms’ stock has fallen by over 42%, destroying over $104 million in market capitalization.”

Syms countered the argument by saying that investors will still be able to buy and sell shares on the pink sheets, while the company will save $750,000 per year in costs associated with being a listed company. The company also indicated that management will be better able to focus its attention and resources on continuing to improve operations and enhance shareholder value.

Many shareholders, however, are convinced that the real motive behind the delisting is to lower the stock price enough so that management can complete a management-led buyout at an inexpensive valuation, leaving shareholders in the dust with nothing to say for their investment. There is speculation that this has long been a consideration of store founder Sy Sims.

Barington and Esopus have begun registering their shares in their own name in order to prevent this process. If the company has more than 300 shareholders on record, then it cannot deregister itself without approval from the shareholders. As a result, the two activists are encouraging other investors to do the same before it is too late and the value of their investment is lost.

In the end, this is an interesting story that is worth following. If the activist investors are able to hold off any deregistration, the company may decide that it is best to relist and deal with the costs rather than remain traded on the OTC markets. This may cause a jump in the share price if the stars align. Combined, these factors make SYM a stock worth watching!

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