Company Settles SEC Charges for Misleading Tender Offer Announcement

A company and its Chair/former CEO settled SEC charges for making a misleading public announcement of a tender offer for shares of US Steel, without having the financial means to complete the transaction.

In the Order, the SEC said that the Chair instructed the company's communications director to prepare a press release announcing an all-cash offer of $35 per share for all outstanding shares of US Steel. In the distributed press release, the company communicated the tender offer, the offering period and the expected completion period, subject to regulatory approvals. The SEC said that the Chair then appeared on CNBC, claiming that the company had the money necessary to complete the deal, that it held no debt, and that none of the company's assets would be used as collateral. The SEC said that within a week of these statements, the company withdrew the offer.

The SEC found that the "[s]tatements in the press release and interview were false." The SEC found the company had less than 1% of the necessary financial resources to fund the tender offer. The SEC found that the company and the Chair did "not have the reasonable belief that it will have the means to purchase the securities to complete the offer." Further, the SEC said the company and the Chair failed to take essential steps to proceed with the offer, such as setting up a depository trust agreement or providing a method for shareholders to tender their shares. 

The SEC determined that the company and its Chair violated SEA Section 14(e) ("Proxies") and Rule 14e-8 ("Prohibited conduct in connection with pre-commencement communications"). 

To settle the charges, the company agreed to (i) a cease-and-desist order and (ii) pay a $500,000 civil penalty. The Chair agreed to a $100,000 civil penalty.