Kona
Grill (NDAQ: KONA) management is raking investors over the coals and they aren’t
happy. Clarke Bennitt LLC was the first to uncover some questionable regulatory filings
that clearly demonstrate a conflict of interest with shareholders. Now, many shareholders
like Clarke Bennitt are demanding changes be made in order to restore confidence in
the company, according to a
Schedule
13D filing with the SEC.
A recent
8-K
filing made with the SEC on December 29, 2008 was a shocking read to the shareholder.
In the regulatory filing Marcus Jundt, chief executive of Kona Grill, quietly disclosed
a large stock sale to his father at the ridiculously low price of $1.19 per share.
Incredibly, this sale accounted for nearly 5% of the company’s outstanding shares!
Clarke Bennitt was also surprised by a
Schedule
13D filing made by the second largest shareholder in the company. Mill Road Capital
noted its opposition to a loan that violated the Sarbanes-Oxley amendments to the
Act of 1943 prohibiting the company from directly or indirectly arranging loans to
management. Further, the proposal wasn’t even part of a competitive bidding process.
It has become clear to these two shareholders that the Kona Grill is not operating
in their best interest. Not only is it against the law to make personal loans to management,
but the proceeds ended up coming from an under-market sale to an executive’s father
for just $1.19 per share. The proposal hurts shareholders in two ways and they demanded
it be rescinded immediately to ensure that a fair price is being achieved for both
Kona Grill and its shareholders.
