Beat up by credit markets, its stock worth half what it was a year ago, Nelnet's day did not start well Thursday, after its annual shareholders' meeting at The Cornhusker.
The Lincoln Journal Star | Posted: Wednesday, May 21, 2008 7:00 pm
Beat up by credit markets, its stock worth half what it was a year ago, Nelnet’s day did not start well Thursday, after its annual shareholders’ meeting at The Cornhusker.
The company had scheduled a 9:30 conference call and Webcast after the meeting to discuss its first-quarter earnings and recent company developments.
After nearly an hour delay because of technical difficulties, Nelnet gave up and canceled the call, then tried again with a telephone conference call in the afternoon.
After a year of credit market crisis that cost the company 700 full-time equivalents in employment and millions of dollars in losses and charges to earnings, the company got a respite this week when the federal government announced it will purchase student loans and also invest in pools of them to help bolster the student lending market.
Nelnet suspended its 7-cent quarterly dividend this week to save capital.
But in a letter released Thursday, the company promised to continue originating loans and to make them available regardless of the school the student attends.
Because of tightening credit market conditions and subsidies cuts imposed by Congress last fall, some lenders, including Nelnet, were becoming more selective in lending,
Nelnet’s cost of funds quadrupled from September to October last year and rapidly made long-term financing of student loans a losing proposition, Nelnet President Jeff Noordhoek told market analysts on the afternoon conference call.
A total of 72 lenders actually left the market for federally-guaranteed student loans, according to Nelnet.
But federal legislation, the Education Department’s commitment to buy loans and Nelnet’s continuing diversification into broader education services gave Nelnet executives an opportunity Thrusday to promise more prosperous opportunties to come.
There are, Noordhoek reminded analysts on the conference call, 18 million young people needing $87 billion in educational financing.
Earlier in the day Nelnet Chairman Mike Dunlap presided over a shareholder meeting, which lasted less than 15 minutes and dealt mostly with routine items such as the re-election of directors and approval of an auditor.
There was one non-routine item: a shareholder proposal seeking to consolidate all the company’s shares into one class of stock. The measure was defeated, although Nelnet did not say by what margin.
Currently there are both “A” and “B” classes of Nelnet stock. Class “B” shares are held solely by Dunlap, former co-CEO Stephen Butterfield and Union Bank, which is owned by Dunlap’s family, and carry much greater weight for voting purposes.
KIP Presidium Fund out of Cleveland had proposed eliminating the Class B stock, saying that research shows publicy traded companies with only one class of shares have better stock performance than companies with dual classes of shares.
The fund also said eliminating the Class B stock would “provide the opportunity for improved governance, increased transparency, and greater flexibility in the capital markets, allowing the Company to remove a potential barrier in terms of unlocking the significant value currently not being reflected in the Company’s share price.”
KIP did not send a representative to Thursday’s meeting to clarify that statement.
Nelnet spokesman Ben Kiser said he didn’t know if KIP’s aim was to try to make Nelnet more attractive as an acquisition target, something that has been rumored as a possibility by financial analysts over the past year as Nelnet’s stock value has fallen by more than 50 percent.