Penwest Shareholders Demand Change
Penwest
Pharmaceuticals (NDAQ: PPCO) may see some changes during the next annual meeting
after a large shareholder proposed a new slate of directors for the board. Perceptive
Life Sciences, Tang Capital Partners, and their affiliates collectively own 37.5%
of the pharmaceutical company and nominated Joseph Edelman, Keven Tang, and Andrew
Levin to the board at the 2009 annual meeting.
Investors should be careful before they vote in the new board members, however. Some
rhetoric contained within a Schedule 13D filing with the SEC raises some questions.
The funds commented:
While we strongly believe that changes to the board of directors are in
the best interest of all shareholders of the company, … (we) may receive unique benefits
if the nominees set forth herein are elected to the board. Such unique benefit will,
if realized, result from the fact that the nominees are principals within our respective
organizations and may be more receptive to our suggestions than any of the members
of the board not affiliated with us.
These nominees may prove to perform better than the existing board, but
the risk is that the principals will act in a more selfish way by promoting their
own returns. Such deals could include financing deals between the company and hedge
fund on above-market terms, the sale of assets to the hedge funds at below-market
prices, and other actions that destroy shareholder value. The question for investor
is: Is the risk worth it?
The above story is the opinion of the author only and it does not reflect
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