AD ALTA
JOURNAL OF INTERDISCIPLINARY RESEARCH
them in the academic press, provided the anonymity of the Plc.
is maintained. The main business activity of the Plc. was and
remains agricultural production, including the production of raw
agriculture outcomes for their processing and further resale. The
Plc. managed 1 500 hectares of arable land and is a beneficiary
of a repetitive annual dotation (subsidy) in the amount of CZK
11 000 000 yearly. It had and still has seven directors and
important legal documents must be signed by the chairman of
the board of directors, or by the vice-chairman of the board of
directors or by the CEO or an agent having a power of attorney
from one of them. According to the Bylaws, shares are
transferable only upon the consent provided by directors. In
2012, the registered capital was CZK 101 000 000 and consisted
of shares in name in the value as described in Table 2.
Table 2: Capital (share) structure of the Plc. during the entire
period 2012
Number of
shares
Nominal value per
share in CZK
2012 value of
shares in CZK
2870
1 000
2 870 000
1493
10 000
14 930 000
1664
50 000
83 200 000
2012 value of all
shares (2012
registered
capital)
101 000 000
Source: Prepared by authors based on the accounting and other
data provided by the target Plc.
In 2011, one of the target Plc.´s shareholders decided to purchase
via shares purchase agreements (“SPA”) from minority
shareholders in order to pass the threshold and become the
majority shareholder of the concerned Plc. This active
shareholder was a business corporation with 7.6% shares
successfully active in the same field as the Plc. (agricultural
production) in the neighborhood, i.e. the active shareholder was
a majority shareholder of prospering agricultural production Plc.
a few kilometers away which regularly paid dividends in the
amount of 11% of the nominal values of shares. Seven directors
and three members of the supervisory board of the Plc. had 22%
shares and the remaining 70.4% shares were held by 500
minority shareholders. Hence the total number of shareholders
was 511 and all directors and members of the supervisory board
were shareholders. Although the target Plc. had a history of non-
payment of dividends and of non-investment, it took out several
loans. The turnover and profit kept declining also. This
deplorable situation and the success of its own similar (if not
identical) business contributed to the decision of the active
shareholder to pass the majority control threshold and to change
the business model, management and even long term strategies.
In other words, the active shareholder wanted to transpose the
experience from the similar Plc in the neighborhood and be in
each of them the majority shareholder, if not the only
shareholder (and thus, de facto, the owner). This active
shareholder took a coordinated individual approach and sent an
offer to other minority shareholders of the target Plc. in 2011
and, based on it, managed to purchase 8% of the shares for 20%
of their nominal value (!!!). Many minority shareholders made
the prompt decision to accept the active shareholder´s offer
based on their knowledge of the poor performance of the Plc, the
lack of investment and thus no prospects, while not getting any
dividends. For three months, the directors did not perceive this
as a threat and did not fight against it. After several months, it
became a general knowledge of all shareholders, including the
directors, that the active shareholder was not merely buying a
few extra shares, but instead he wanted to “get” the target Plc.
and the remaining shareholders started to speculatively demand a
higher price while being ready to wait out a few months or years
(this attitude kept reinforcing over time and led to the increase of
the price paid to 50% of the nominal value in 2016). This
process continued progressively on during the entire observed
period and the prices went from 20% of the nominal value in
2011, then over 25% in 2012, to 50% in 2016. At the end of this
period, the active shareholder managed to increase his
participation from 7.6% to 65%. Further, there are no indices
about the termination of this process, i.e. the active shareholder
kept purchasing shares even in 2017 for the growing prices, i.e.
despite the passing of the 50% majority line. Manifestly, the
drive for the control and perhaps even the total ownership
(achievable by 90% or 95% participation by the squeeze-out
procedure) is a crucial factor in determining the price of the
shares. The accounting value, historical cost or current balance
sheet have very little to do regarding the determination of the
price to be paid for shares. Interestingly, this share purchase
process was not interrupted or modified by the law changes.
Until 31st December 2014, the share purchase and buy-outs were
regulated provisions of the Act No. 513/1991 Coll., Commercial
Code. However, the re-codification of the Czech Private law
brought the Act No. 89/2012 Coll., (new) Civil Code which
abolished the Commercial Code and moved the special Plc
regulation into the Act No. 90/2012 Coll., Business Corporation
Act, while the general regulation of natural and artificial persons
is included in the (new) Civil Code. Even more interestingly, this
trend was even not interrupted or modified after the active
shareholder reached the 50% threshold in 2014. However, the
management of the Plc. changed dramatically at this point.
Namely, a noticeable modernization and revitalization of the
agro-technical equipment and employment of modern
technologies was launched. Further, in 2015, the Plc. under the
management determined by the active shareholder purchased 17
hectares of arable land. Even in other aspects, the new
progressive business strategy since 2014 is noticeable. Although
at the end of 2016 the situation of the Plc. was not completely
financially stable, the general perception and assessment of the
Plc. is better than in 2011.
This is the background of the subjective perception of the nature
and value of the stock of the Plc. and the objective impact was
obvious. Namely, the contractual sales price of shares during the
period 2011-2016 was determined by the interplay of the
demand and supply and the general willingness of minority
shareholders to sell their shares. Naturally, the accounting value
is to be determined based on the Czech law, namely based on the
registered capital. Table 3 provides a highly relevant information
about the registered capital, accounting value and average
contractual price for shares.
Table 3: Registered capital, accounting and contractual prices of
Plc´s shares in 2012 – 2016
Source: Prepared by authors based on the data provided by the
target Plc.
Due to the maintenance of the same number and type of shares
of the stock of the Plc., the slowly increasing registered capital
and the determination of the active shareholder to increase his
participation, control and perhaps even the ownership led to the
fact that both accounting and contractual prices of all three types
of shares grew during 2012-2016, but this growth has a
dramatically different intensity. The accounting value grew
slowly and in the same proportion of all nominal values, while
the contractual price grew faster and contractual prices shares in
the nominal value of CZK 1000 seem to react faster. This trend
continues even after 1st January 2017 when the active
shareholder has a rather comfortable majority of 65%.
Yr
Reg.
Capi-
tal in
CZK
1000
Acc.
value
of
shares
in the
nomin.
value
CZK
1000
(2 870
pc.)
Aver.
contr.
price
for a
share
in the
nomin.
value
CZK
1000
Acc.
value
of
shares
in the
nomin.
value
CZK
10 000
(1 493
pc.)
Aver.
contr.
price
for a
share
in the
nomin.
value
CZK
1000
Acc.
value
of
shares
in the
nomin.
value
CZK
50 000
(1 664
pc.)
Aver.
contr.
price
for a
share
in the
nomin.
value
CZK
50 000
2012
104 122
1 030
250
10 309
2 500
51 545
12 500
2013
106 591
1 055
300
10 553
2 800
52 767
12 800
2014
114 533
1 134
420
11 341
3 100
56 709
14 000
2015
114 195
1 130
500
11 306
5 000
56 532
25 000
2016
115 397
1 142
500
11 425
5 000
57 127
25 000
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