When Tullettt Prebon Plc’s $12 per share bid for eSpeed was rejected in mid April, a bilious geyser erupted, with shareholders demanding to replace board members, retain an independent auditor to review the joint services agreement and convert class B shares to class A shares, adding that the company’s dual voting ownership structure entrenches eSpeed management. And the descriptive language included in the press releases was enough to make Quentin Tarantino grin.
“Chief Executive Howard Lutnick’s three-kingdom reign over Cantor Fitzgerald, eSpeed and BGC Partners appears so infested with potential conflicts of interest and incestuous inter-company transactions that a completely new set of corporate governors may be required to exterminate any vermin from eSpeed’s board room,” says Robert L. Chapman Jr., managing member of Chapman Capital. Chapman Capital owns 9.6% of eSpeed.
In the earnings conference call, eSpeed Inc. Chairman, President and CEO Howard Lutnick said of Chapman, “I have serious concerns about their trading behavior,” adding that while Chapman was urging the sale of the company and demanded the removal of the directors, Chapman sold 15,000 deep in-the-money calls, representing about 1.5 million shares. “These are not the actions of a serious long-term holder of eSpeed and we simply are not going to engage in anyway with the Chapman firm. As for Tullett, its actions exposed its long-term vulnerability, which is its lack of competitive technology.”
In the first quarter, eSpeed’s revenues were $41.4 million, down from $42.6 million in the same quarter last year, and GAAP net operating income was $857,000, down from $2.02 million in the same quarter last year. It represents the last quarter eSpeed banks revenue from licensing of the Wagner patent, which expired in February.
