GenesisIntermedia Postpones Stock Split
The Board of Directors of GenesisIntermedia (Nasdaq: GENI)
announced that it will postpone indefinitely the previously
announced 3-for-1 stock split. Originally announced on September
5, 2001, the Board agreed that due to unfavorable market
conditions they would wait until further analysis to execute the
split. GENI shares were trading at $17.33 upon the declaration of
the split and have traded as low as $13.05 since that time.
The company appears to be under SEC scrutiny for its questionable
involvement with Adnan Khashoggi. Khashoggi was a financial
middleman in the Iran-Contra scandal and numerous other
endeavors. Please read the original split announcement for
further details.
Original Announcement:
09/05/01
Geni's Looking for a Little Magic
GenesisIntermedia, Inc. (Nasdaq:GENI; Frankfurt:GIA) announced a
3-for-1 stock split today in what some consider a desperate
attempt to bolster the stock and to maintain the minimum
requirements for its Nasdaq listing. Nevertheless, it would be
difficult to argue that the Board's announcement is motivated by
recent altercations with the SEC.
On Tuesday the Board issued a letter to the shareholders that
reiterated current corporate endeavors and a reminder that the
company had been added to the Russell 2000 Index in July. Sounds
great until you get to the part that states their concern about
the massive short selling of common shares. Chairman and CEO Ramy
El-Batrawi encouraged shareholders to take their shares off the
street and into certificates, stating, " By doing this, a short
seller would not be able to borrow your stock for short sales
without your permission. When your stock is held in a margin
account, brokers can loan it out."
In a Bloomberg article that was also issued September 4, it was
cited that Saudi financier Adnan Khashoggi (financial middleman
in the Iran-Contra scandal) forfeited $7 million in inside trades
to help GENI repay his loan. As the second-largest shareholder in
the company, the SEC became aware of potential problems as
Khashoggi's actions raised several issues under U.S. securities
laws. According to a former SEC commissioner, using inside
information would be the prime violation.
According to Bloomberg, Khashoggi's holding company Ultimate
Holding Ltd. has lent as much as $49 million to Genesis, which
currently maintains a $9.3 million negative net worth. During the
first six months of this year Ultimate surrendered almost $7
million in short-swing profits to Genesis. These are profits
accumulated solely from buying and selling GENI shares. The
article stated, "In an interview with Bloomberg News in January,
Ramy El- Batrawi, chief executive of Genesis, said he has known
Khashoggi for about 15 years and worked with him ``on deals''
between 1988 and 1993. He said the two speak ``almost every day."
El-Batrawi expressed surprise that Khashoggi's name had been
listed on Ultimate's filings with the U.S. Securities and
Exchange Commission. `It's strange that it came out,' the Genesis
CEO said. `He wanted a low profile'."
Genesis issued its last stock split just six months earlier. That
split was also a 3:1 announced at the $19 level. At the execution
date, shares began trading at $7.45 and continued to escalate to
the current price of $17.70. There are currently 23.3 million
shares outstanding and a float of 9.8 million - 20.6 percent of
which is short interest. The current stock split is payable
September 24, 2001.
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