Description

Preview Systems is a failed internet company in the process of liquidation. The March balance sheet shows $61MM in cash and $9.6MM in short-term securities (defined in the 10-K as corporate notes, bonds, gov debt and commercial paper due in less than a year) with liabilities of about $8MM. The company estimates a bit over 18 million shares will be outstanding during the liquidation. The net cash based on these figures is about $3.50 per share, and there are additional assets including accounts receivable and an asset sale agreement for $5MM. A preliminary proxy dated May 25 2001 indicates the company plans to hold a meeting July 13 and make an initial distribution in August of at least $3.25 per share. This alone is a solid gain in perhaps 3 months, with a residual value of perhaps 50 cents or more. Regarding the liquidation process, holders of approximately 25% of shares have agreed to vote for the liquidation and another roughly 15% of the stock is held by >5% owners who presumably are in agreement so the vote to wind down should easily pass. My understanding is the actual process of liquidation is governed primarily by state law, in this case Delaware since the company is incorporated in Delaware. The process is explained in the preliminary proxy, but the significant points in my view are that the company plans to file papers of dissolution sometime after the initial distribution, at which time the stock will stop trading and the transfer books will be closed. State law requires the company to remain in existence for at least 3 years after dissolution, or longer if directed by the Delaware Court of Chancery, in order to meet its final obligations. Also, the company may transfer assets to a liquidating trust, which may have tax implications and is discussed in the preliminary proxy.

Catalyst

The company has decided to liquidate.