Why does a flyspeck of a town in North Florida want voting rights to a potentially massive block of Publix Super Market's stock?
Maybe it's tied to a recent campaign to oust the chain's directors at the upcoming annual meeting and take the company public.
It's tough to tell because none of the town officials are talking about their effort to seize voting rights in Publix stock by eminent domain, a move one veteran securities lawyer described as "totally bizarre."
A Publix spokeswoman declined to comment on the notice, saying it needs to see the court filing, which the town is trying to put under seal.
Casey Bigelow, Campbellton's lawyer, defended the unusual strategy while declining to clarify its purpose.
"It would only benefit Publix employees, let's just leave it like that," he said.
On March 10, Campbellton put a summons in the nearby Graceville News saying it had filed "a complaint of condemnation and declaration of taking." In torturous legal language, the notice says the town is taking the voting rights in Publix stock held by Floridians who own any of hundreds of mutual funds, annuities or insurance policies named in the suit because the people holding these rights are, in most cases, not voting these shares.
Shareholders have the right to vote at annual meetings for policy changes and board members. The more shares you own, the more votes you have. In many cases, small investors do not exercise the right to vote, feeling they will have little impact.
Bigelow could not say how many people are in the category or how many shares they represent. "We requested that information from the mutual funds and annuities but they declined," he said.
Executives and directors of Publix are exempt from the town's effort, the notice says, "because it is considered reasonable … that the directors and executive management of the company routinely vote their voting rights."
Publix's founder, George Jenkins, gave 85 percent of the company's shares to its employee stock ownership plan. His heirs and other insiders control the rest, as well as the company's board. A group of dissident shareholders is proposing to replace those directors with candidates who want to take the company public.
As a privately traded company, Publix uses an independent analyst to set the share price based on its financial performance and the share prices of publicly traded supermarket chains. When employees want to sell their stock, they generally sell them back to the company.
But over the years, Publix shares have found their way into mutual funds and other outsiders' hands through "gray market" transactions.
"There are a battery of venture capitalists who watch the marketplace and make it known to employees by word-of-mouth that they are interested in taking Publix shares off their hands through private offering exemptions," said Jack Kiefner, a St. Petersburg lawyer who specializes in securities law. "They accumulate the shares and make them available in blocks to the funds."
Kiefner said it is impossible to guess how many Publix shares are held in the funds named in the Campbellton lawsuit. But he was skeptical of the town's assumption that individual investors have the right to vote shares held in a fund's portfolio.
"Those shares are held by the mutual fund or annuity, they're not in the individual investor's name," said Kiefner, a former SEC lawyer. "Investors don't have legal ownership of specific shares. The legal title holding is in the fund."
In other words, Campbellton's argument that it can take away a mutual fund investor's right to vote a company's stock is flawed because those investors don't have those rights to begin with.
Saying he can't imagine how the Campbellton's claim could be enforced, Kiefner said, "It's patently absurd. In my 39 years as a securities lawyer, I've never seen anything quite like this."
Campbellton's lawyer, who was admitted to the Florida Bar in October, said the town has its own investment experts who disagree with Kiefner's assessment.
"It might be something that's not done a lot," he said. "But Campbellton is entitled to zealous representation."
The town is giving Publix shareholders until the end of the month to respond to its demand. Otherwise Campbellton will allegedly have the right to vote those shares at the upcoming Publix annual meeting on April 12.
Times staff writer Mark Albright contributed to this report. Kris Hundley can be reached at [email protected] or (727)892-2996.