An investment group is trying to make
an offer the struggling company can't refuse.
New York-based Trinad Advisors has proposed to invest $5 million in the struggling video-game software company for 3.3 million shares of Majesco's stock, according to a regulatory filing made public Thursday. That equates to about $1.50 a share, or a 22% premium over the company's closing stock price on Thursday.
The investment is contingent on a due diligence review of the company's finances and operations. Additionally, Trinad is demanding the right to name a majority of directors to Majesco's board.
"We have long been proponents of, and believers in, the significant potentialof the company," Robert Ellin, Trinad's managing member, said in a letter to Majesco's board on Tuesday. But he added, "We believe that the company now faces danger to its continued existence and prosperity. ... The time has clearly come for the board to take decisive and aggressive action to begin to deal with the enormity of problems that now face the company."
According to the filing, Majesco has yet to respond to the offer letter, which was made public in the regulatory filing. But Trinad, which now controls more than 9% of Majesco's stock, warned that it wouldn't just go away if the offer is turned down. Instead, Ellin issued an only thinly veiled threat to enlarge Trinad's stake and to start a hostile takeover of the company.
"Your failure to agree to our generous proposal could only be deemed to have been made for the purpose of entrenching the current management of the company and the existing board of directors," he wrote. "Time is clearly of the essence, as any further diminution in shareholder value is simply unacceptable."
Majesco representatives did not return calls seeking comment.
Majesco carved out a niche itself, mostly by publishing games and movies for
Game Boy Advance and other handheld systems. But the company has struggled of late as it tried to diversify its portfolio of games for
PlayStation 2 and
Earlier this month, the company
posted a much worse-than-expected loss and warned of more red ink to come. The loss came in the wake of an earnings warning in July that led to the departure of the company's CEO and CFO.
Even before the quarterly report, analysts were already
questioning Majesco's viability. And the report added credence to those questions, as the company acknowledged that cash reserves were running low, a key creditor had limited its credit line and that it needed to secure new financing to ensure its ability to continue as a going concern.
Wall Street cheered news of the proposed investment. In after-hours trading, Majesco's stock was up 10 cents, or 8%, to $1.33. Earlier in the day, the company's shares closed regular trading off 5 cents, or about 4%.