Edgewater to Buy Back Tendered Shares

Shareholders jumped to unload 26.6 million shares of Edgewater Technology Inc. at $8 per share, but the company said it only had enough cash ($130 million) to buy back 61 percent of those (16.25 million shares). About 4.5 million of these shares were tendered pursuant to notices of guaranteed delivery.

Formerly known as StaffMark Inc., Edgewater Technology Inc. is the Fayetteville holding company of Edgewater Technology, an e-solutions business based in Wakefield, Mass. The corporation is in the process of moving its headquarters to Wakefield.

Edgewater announced the preliminary results of its tenure offer today. The offer, which was originally made in December, expired on Jan. 22.

They buyback accounts for 56.6 percent of all outstanding common shares.

By the end of the day the announcement was made, Edgewater’s stock had

dropped by 25 percent ($1.75 per share) to $5.19 per share.

Requesting anonymity, the only stock analyst who still covers Edgewater said the drop in stock price indicates “people think the business is worth less than before.”

Clete Brewer of Fayetteville, CEO of Edgewater Technology Inc., couldn’t be reached for comment.

Many shareholders have expressed anger over Edgewater selling off its staffing divisions last year and reinventing itself as a technology company by focusing on its Edgewater Technology division in Massachusetts, the site of a Dec. 26 shooting in which seven Edgewater employees were killed.

A press release from Edgewater said the company will “accept properly tendered shares on a pro rata basis, with a preliminary proration factor of approximately 61 percent. … Payment for accepted shares, and return of all other tendered shares, will be made early next week by the depository after the proration factor is finalized.”

As of Jan. 22, Edgewater had about 28.7 million shares of common stock issued and outstanding. As a result of the offer, Edgewater expects to have about 12.5 million shares of common stock issued and outstanding as of the time immediately following payment for the accepted shares.

Credit Suisse First Boston and Banc of America Securities served as co-dealer managers for the tender offer. EquiServe is the depositary.

The announcement came one day after news articles revealed that Robert Chapman Jr. of Chap-Cap Partners in California had sold 400,000 shares of Edgewater stock between Jan. 10 and Jan. 18 for prices ranging from $6.62 to $6.70.

Chapman said in a filing with the Securities and Exchange Commission that he lowered his stake in the e-solutions business because of concerns over its financial health and potential conflicts of interest concerning the company’s management and board of directors.

Chapman expressed in the filing his concerns that Edgewater’s largest trade receivable was from Synapse Group headed by Edgewater board member Michael Loeb. Synapse accounted for 14 percent of Edgewater’s third-quarter revenue and 24 percent of its accounts receivable as of Sept. 30.

Also, Chapman said in the filing that Edgewater officials and board members “appear to lack either the ability or motive to take action” in the direction of enhancing shareholder value.

Before the January transactions, Chapman owned 5.2 percent of Edgewater stock. After selling 400,000 shares, his stake in the company would have been 3.8 percent. But with 16.25 million shares being repurchased by the company, Chapman’s 1.1 million shares indicate once again that he is a primary shareholder with 8.8 percent of Edgewater’s common stock.