Small investors in resort get some wiggle room

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Shareholders OK reverse stock split

The Daily Inter Lake

Winter Sports Inc. shareholders approved a reverse stock split on Tuesday, but the corporation will delay its filing with the Montana secretary of state to give small investors time to find a way to remain involved with Big Mountain Resort.

"We pledged to work together to find a way," said Dale Duff, one of more than 100 shareholders cashed out in the latest stock split. "Winter Sports management was receptive to moving forward in resolving this issue to mutual satisfaction, to keep the community involved."

Duff and several other small investors are researching a way to keep local residents involved with the ski resort in the wake of a shift in stock ownership to out-of-state investors.

"Local input is immeasurable," Duff said. "It's more valuable than stock."

None of the major shareholders attended the meeting, but their proxies allowed the vote to move forward. Their absence disappointed Duff and other small investors who attended.

"They were not able to feel the pulse of our community and not able to benefit from the input of local people," he said.

William P. Foley II, chief executive officer for Fidelity National Financial, is Winter Sports' biggest shareholder, with 48.8 percent of the stock.

Duff asked the directors to delay voting on the stock split for 60 days. They declined, but compromised by delaying the secretary of state filing. Once the amendment to Winter Sports' articles of incorporation is filed, the stock split becomes effective. There is no deadline for filing with the state, according to attorney Steve Cummings, legal counsel for Winter Sports.

Of the 12,138 shares of common stock, 7,798 votes were cast in favor of the stock split; 83 shares were cast against and 20 abstained, Cummings said. About 65 percent of the shareholders voted.

Rhonda Fitzgerald, one of the small investors working with Duff, said it's crucial to keep a local connection in the operation of Big Mountain.

"This is a place where a community has created and defined the ski resort," she said. "I admired the fact that so many people had been participating [in stock ownership] all along. We wanted to be part of that, and that's why we bought stock."

Fitzgerald said that historically, two layers of shareholders have been involved - those whose families have owned stock since Winter Sports began and those like herself, who have seen the value of community ownership of the ski resort.

In a letter to the Daily Inter Lake, Tina Solberg Gemignani of Whitefish said the buyout was at a fair price, "but it's not about the money.

"It's about memories. It's about history. It's about legacy," she wrote. "Many of the shareholders bought out have held the stock for over 50 years, passing from generation to generation. We didn't bail out even though in leaner years the stock sat dormant in our portfolios. Were we that big of a burden or threat that we needed to be 'streamlined?'"

A 2004 1-for-150 reverse stock split freed Winter Sports from regulation by the Securities and Exchange Commission and trimmed the number of shareholders from 900 to about 150. The latest split further reduced the number of shareholders to about 50.

The corporate restructuring is aimed at giving the remaining shareholders better tax advantages as a Subchapter S corporation. It also is an opportunity to recapitalize the company. Winter Sports will pay $3.3 million for all resulting fractional shares in the latest split, a 1-for-15 reverse split.

Winter Sports closed a private placement of its common stock in June 2005, raising $12.5 million by issuing an additional 4,183 shares of common stock.

The corporation subsequently completed the first stage of a two-phase private-placement offering to accredited investors in July this year, which raised more than $6 million. The second stage will close on March 31, 2007 and is expected to bring in another $6 million.

The offerings give the corporation about $24 million in new capital.

Features editor Lynnette Hintze may be reached at 758-4421 or by e-mail at

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