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Donegal Insurance Group has called Gregory Shepard's tender offer “illusory” since the beginning, and it's pointed out several flaws in his plan to buy more than 960,000 shares of its Class B stock.
But one of the things Donegal has never overtly questioned is Shepard's ability to actually cough up the $29 million in cash if everything goes his way. Yet Shepard filed an amendment Thursday to his initial tender offer, detailing his net worth and how he would come up with the money.
Want to guess how he'd do it? By selling stock in other companies, of course.
According to his filing with the U.S. Securities and Exchange Commission, Shepard owns 1 million shares of "a New York Stock Exchange-listed publicly traded company." As of June 12, the average 10-day trading volume for that stock is more than 1.5 million shares, Shepard says, citing Yahoo Finance.
Shepard can trade these shares at any time, the filing says, thereby giving him the cash he'd need.
Shepard then sets his net worth at $100 million to $120 million and says $80 million to $88 million is liquid. The rest is illiquid assets, which "consist primarily of farmland and residences," the filing states.
All of this is interesting. A welcome glimpse into the enigmatic world of Gregory Shepard. But it doesn't seem to have much to do with Donegal's arguments that his offer isn't viable.
In a May 29 letter to shareholders, the company highlighted two major arguments:
• Shepard's offer requires regulatory approvals from insurance regulators in six states, including Pennsylvania. And Shepard hasn't begun to apply for those approvals.
• The tender offer also must be approved by the Federal Reserve Bank of Philadelphia. Based on the length of a review period required after Shepard filed his requisite application (he got that one filed April 29), Donegal said it doesn't believe Shepard can receive approval before the new July 31 expiration date of his offer.
And there's this major snag: Unless some of Donegal's officers and directors tender their Class B shares to Shepard, he can't buy enough to achieve the 962,636 he's seeking. And "the officers and directors of DGI have stated their intentions not to tender their Class B Shares to Shepard," the letter to shareholders states.
As Tim Stuhldreher pointed out a few weeks ago, Shepard and his offer are quite a puzzler.