The shareholder group led by Lionbridge Capital I, LP and its affiliates, Robotti & Company, Inc. and its affiliates, and Winthrop Realty Partners, L.P. and its affiliates, who collectively own 897,085 shares, or approximately 6.0% of the outstanding shares of CIM Commercial Trust Corporation issued the following statement in connection with a severe disclosure omission and debilitating material misstatements by CMCT that the group has uncovered under the rules of the Securities and Exchange Commission (the “SEC”), which serves to revoke CMCT’s Form S-3 eligibility for its current Rights Offering:
“The Company purports to have amended its Charter at some point during the fall of 2019 to decrease the beneficial ownership limitation applicable to its stockholders from 9.8% to 6.25%. As recently as June 1, 2021, CMCT disclosed in its preliminary prospectus supplement for the Rights Offering that its ‘charter prohibits any person from acquiring or holding, directly or indirectly, shares of [our] capital stock in excess of 6.25%, in number of shares or value, whichever is more restrictive.’ A beneficial ownership limitation of 6.25% under the Charter is also cited in numerous filings CMCT has made with the SEC since October 2, 2019, including its Annual Reports on Form 10-K. However, CMCT failed to disclose this purported amendment to its Charter on a Form 8-K, which is a clear requirement under SEC rules. The purpose of Form 8-K is to provide investors with real time disclosure of important corporate events. Generally, a Form 8-K must be filed with the SEC within four business days of the event that triggers disclosure. When a company amends it charter or bylaws, Item 5.03(a) of the General Instructions to Form 8-K requires that such company disclose on a Form 8-K the effective date of the amendment, and a description of the provision adopted or changed by amendment and, if applicable, the previous provision. No such disclosure has ever been made by CMCT with respect to its purported Charter amendment, despite the fact that the Company has made multiple other corporate governance disclosures on Form 8-K.”
“There is little doubt that CMCT understands that charter amendments are required to be filed on Form 8-K with the SEC: CMCT disclosed and filed two amendments to its Charter on a Form 8-K on September 6, 2019, in connection with its 1-for-3 reverse stock split and reversion of the par value of its issued and outstanding common stock to $0.001 per share. Yet, nowhere to be found among its SEC filings is any Form 8-K that discloses the Charter amendment that purportedly lowered the beneficial ownership limitation from 9.8% to 6.25%. Similarly, we have not seen any filings made with the Maryland Department of Assessments and Taxation in connection with the purported Charter amendment.”
“A material SEC filing omission such as this, where a purported Charter amendment relates to fundamental stockholder rights and attempts to limit stockholder influence, is a grave offense. As we have informed the SEC and Nasdaq under separate cover, the consequence of these SEC disclosure violations is ineligibility to use the Company’s shelf registration on Form S-3 for the Rights Offering. To use Form S-3, a company must, among other things, have been subject to reporting under the Securities Exchange Act of 1934 for at least twelve full calendar months preceding the filing of the Form S-3 and have filed all required reports during that period. Form 8-K is required to be filed upon the occurrence of specified material events, and failure to comply with this requirement results in loss of Form S-3 eligibility. Specifically, a company’s failure to file a Form 8-K under Item 5.03 – Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year, will result in Form S-3 ineligibility. We have no way of knowing the exact date of the purported Charter amendment or whether it was appropriately effected. However, because CMCT failed to file it, the Form S-3 must be declared ineffective.”
“These disclosure violations are extremely serious. Misleading stockholders with respect to material rights attached to their securities not only causes such investors to be misled, but also has a sweeping, chilling effect on the market. In our view the Company is not using the 6.25% ownership limitation to protect its REIT status, but to stifle existing and potential stockholders from participating in this flawed Rights Offering.”
“In addition to the SEC’s broad and severe enforcement options for an issuer’s failure to timely file a report on Form 8-K, there are also exchange implications for the Company under Nasdaq listing standards Rule 5250(b)(1) and Rule 5810(b). While all insufficient disclosure is reflective of inappropriate internal controls, we believe that CMCT’s failure to abide even by the most basic corporate disclosure requirements is indicative of much more pervasive governance problems and fiduciary failures at the Company.”
“We have previously detailed the many ways in which CMCT stockholders have long suffered under an unresponsive, underperforming, entrenched Board. The Board has refused to engage with us regarding our slate of five highly qualified director candidates, and is now delaying the 2021 Annual Meeting so that it can embark on a defensive, dilutive Rights Offering, with respect to which the Company’s own affiliates have been granted a waiver that privileges them with regards to oversubscription, thereby further prejudicing independent stockholders. Unfortunately, it appears that we have yet to reach the nadir of irresponsible corporate stewardship at CMCT. As it is clear to us that the Company has failed to file a required Form 8-K for its purported Charter amendment, we call on the Board to immediately cease its scorched-earth tactics and engage with us constructively to address the structural issues we have identified and work to unlock stockholder value. It is time for this Board to finally acknowledge and live up its duties to represent the best interests of the 79% majority of independent stockholders, and to stop hiding behind its obstructionist governance and policies.”
CONTACT:
Greg Morillo
Lionbridge Capital LP
Email: greg@lionbridgecap.com
Tel: (212) 300-8003
John Moran
Robotti & Company Advisors LLC
Email: moran@robotti.com
Tel: (646) 442-6702
Michael Ashner
Winthrop Realty Partners, L.P.
Email: mashner@winthropcapital.com
Tel: (516) 822-0022
Bob Marese
MacKenzie Partners, Inc.
Email: bmarese@mackenziepartners.com
Tel: (212) 929-5500