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Sights are set on rise in Pre-Paid Legal’s era

BY STEVE LACKMEYER Published: November 15, 2009

"And our lawyers can help them with that. They can also help on debt collection — these businesses need help in tough times to collect every dollar they can.”

Dollarhide said that when the economy recovers, Pre-Paid is in good position to do even better — if it can survive a recently launched Securities and Exchange Commission investigation of Pre-Paid’s marketing practices and stock repurchase program.

Pre-Paid has had a mixed bag in its dealings with the SEC. Several years ago, the company restated its earnings steeply downward after regulators disagreed with the way it booked its sales staff’s commissions. But the last time the SEC came around Ada, the end was nothing but a hit on the stock price.

"Investors hate bad headlines,” Dollarhide said. "Obviously a subpoena casts a cloud. How dark that cloud is remains to be seen. The sooner they can get through that, the better.”

Stonecipher said he was surprised, but not shocked, by the latest investigation. He suspects the probe is related to his company’s repurchase program, in which Pre-Paid has spent $421 million buying back 14 million of 24 million shares the past several years.

"We’re a public company, and that’s the price you pay when you’re a public company. It’s not the best use of our resources, not best for shareholders. It’s only in the interest of the short-sellers. The shorts don’t like our stock buyback program.”

Stonecipher’s response makes sense to Dollarhide.

"The executive founder of a company will always put something in a good light,” Dollarhide said. "And I’m sure the short-sellers don’t like it or anything that might limit them. Some blame short-sellers for the entire crash.”

Could Pre-Paid go private?

"We don’t really need to be public anymore, we don’t need the cash,” Stonecipher said. "We’re buying back one day at a time.”


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