Reiss v. Financial Performance Corporation
New York Supreme Court, Appellate Division
715 N.Y.S.2d 29 (2000)
Marvin Reiss and Rebot Corporation (plaintiffs) held warrants to buy shares of stock in Financial Performance Corporation (Financial) (defendant) for 10 cents per share. Rebot had received warrants as consideration for a loan Financial could not repay, while Reiss received warrants for serving on Financial’s board as president. Financial shareholders approved a one-for-five reverse stock split, meaning each stockholder owned one share after the split for every five owned beforehand, and the new shares were worth five times the value of the old shares. The warrants did not address how stock splits would affect the warrant terms. After the reverse split, Reiss and Rebot sought to exercise their warrants by buying shares at 10 cents per share without adjusting for the reverse split. Financial countered that the warrant holders’ rights had to be proportionally adjusted such that they could buy only one-fifth the total number of shares originally authorized at 50 cents per share. Reiss and Rebot sued for a declaration that they were entitled to purchase the original number of shares at the original price. The trial court dismissed the complaint. Reiss and Rebot appealed.
Rule of Law
Holding and Reasoning (Friedman, J.)
Concurrence/Dissent (Saxe, J.)
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