Vestin CEO interested in buying back shares

Kevin Rademacher

Tuesday, Aug. 24, 2004 | 10:32 a.m.

Despite dropping an earlier plan to take Vestin Group Inc. private, the company's founder and chief executive is still interested in buying up shares of the company.

Vestin Chief Executive Michael Shustek, in a filing made Monday with the Securities and Exchange Commission, said he intends to purchase additional shares in the company. Those purchases, the filing said, will come through privately negotiated transactions as well as open-market purchases.

Following a recent 1-for-2 reverse stock split, Shustek owns 2.7 million, or 79 percent, of Vestin's 3.4 million outstanding shares.

The filing indicates that his continued stock purchases could ultimately push the company private.

"If Mr. Shustek purchases a significant number of the company's shares, there may be so few remaining stockholders and publicly held shares that the company would no longer meet the continued listing requirements of the Nasdaq SmallCap Market," the filing said. "In addition, it is possible that the company would become eligible to de-register as a reporting company."

The filing also said Shustek does not know how many, if any, additional shares he might purchase.

Shustek also indicated that he will not pay a premium for any additional shares. Vestin stock was up 6 cents on Monday, closing at $1.93 per share.

The low stock price, the SEC filing said, is attributable to the thinly traded nature of the shares as well as losses the company posted in 2003. The filing also blames the lackluster stock performance on an SEC inquiry into the company's affairs. The inquiry was announced in March, and in a recent shareholders meeting, while denying any wrongdoing, Shustek said the company has spent $1.5 million mounting a defense.

The filing said the inquiry has damaged the company's reputation and earnings.

Also, Vestin has filed a motion in U.S. Bankruptcy Court in New York seeking to have a trustee put in charge of Mid-State Raceway Inc., charging that "the debtors have and are grossly mismanaging their affairs."

With an outstanding loan of $26 million, Vestin is the largest creditor for the company, which operates the Vernon Downs harness racing track in northern New York.

Vestin officials have claimed that, despite the company's management problems, its loans are sufficiently backed by property and personal guarantees.

In its filing, Vestin claimed that Mid-State "knowingly issued purse checks with insufficient funds," resulting in a series of bounced checks. The filing also claims that Mid-State failed to act on an offer by Vestin to extend an additional $500,000 loan to cover the bounced checks and preserve racing at the venue. Vestin also claimed that Mid-State refused to negotiate with a "qualified potential buyer" instead negotiating with a bidder that had no experience in harness racing.