UPDATE 2-Host America shares suspended after run up, sales
Fri Jul 22, 2005 01:16 PM ET
NEW YORK, July 22 (Reuters) - The U.S. Securities and Exchange Commission on Friday temporarily suspended trading in Host America Corp. (CAFE.O: Quote, Profile, Research) shares over concerns a company statement about a deal with Wal-Mart Stores Inc. (WMT.N: Quote, Profile, Research) may have been misleading.
Host America's shares rose dramatically after the release, going from a close of $3.09 on July 11, the day before the release was issued, to an all-time high of $16.88 on Tuesday, July 19.
During that time, three major shareholders in the company began to cash in, including Host's second-largest shareholder, who sold off the majority of his stake.
Host America on July 12 issued the release saying it would begin surveying 10 locations operated by Wal-Mart with an eye towards installing an energy-saving florescent lighting system at the company's stores.
Officials at Host America did not respond to calls on Friday. A Wal-Mart spokeswoman declined to comment.
In a filing with the SEC, Hamden, Connecticut-based Host America said the commission's Fort Worth, Texas, office "has requested the voluntary provision of documents and related information regarding Host's press release of July 12 ... and into related developments in the trading of Host securities."
The company added it is "fully cooperating with this inquiry."
The suspension was due to last till Aug. 4.
Host shares closed at $13.92 on Thursday.
CASHING IN
On July 18, Roger Lockhart, the company's No. 2 shareholder, sold off the majority of his holdings in the company in deals worth more than $6 million.
He sold 392,330 common shares, 94 percent of his stake in the company's common shares at $13.85 a share, in trades worth $5.4 million. That left him with 24,500 common shares. Prior to that sale, he held about 9 percent of the company's outstanding common stock.
In addition, he sold 135,400 warrants on the stock exercisable at $5.50, in trades worth $1.2 million. That left him with 99,120 warrants exercisable at $2 and 266,667 shares of preferred stock convertible to common at $1.50.
In a telephone interview, Lockhart on Friday noted that, with the exception of the July 18 trades and another sale of 36,000 shares at $4.17 in October, he has sold no shares in the company for three years.
Another holder, director Peter Sarmanian, sold 40,000 shares, representing about two-thirds of his stake, at prices ranging from $6.31 to $6.48 on the day of the Wal-Mart announcement, also according to a filing.
Also on July 12, shareholder Gilbert Rossomando sold about 4,500 shares, at price ranging from $6.43 to $6.47, reducing his stake to 42,095 shares, according to SEC filings.
These shareholders could not immediately be reached for comment.
Lockhart had acquired his stake in Host America when the company bought Select Force Inc., a provider of employment screening services where he had served as a director.
Host sold the Select Force business in March.
For much of its history, Host America's primary business was cafeteria operations. In late 2003, it expanded into electronics, with a product called LightMaster Plus that reduces the energy used by florescent lights by 15 percent to 30 percent. That product is the subject of the July 12 release.
Through the nine months ended March 31, Host recorded a $4.8 million net loss on sales of $21.6 million. The energy- management business over that time recorded sales of $1.1 million.
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