Absence of rationality no argument

On Friday (October 17), federal court judge Jeffrey T. Miller dismissed a suit that investors had brought against Bridgepoint Education and the Wall Street firm that controls it through subsidiaries, Warburg Pincus.

The investors had complained that the for-profit education company had acted to help its board and Warburg through a $19.50 per share tender offer for its own stock, 15.7 percent above the market price.

Warburg, which originally financed Bridgepoint and still controls more than 60 percent of it, has said it wants to get rid of its shares but has not sold many of them. Bridgepoint's tender offer for its shares was intended to let Warburg sell at a generous price and also help board member/shareholders, plaintiffs claimed.

The plaintiffs said that no economically rational independent director would agree to purchase a company's publicly traded stock at a premium to the market. There were other complaints about the timing of the tender offer.

In dismissing the case, Judge Miller said, among other things, that the plaintiffs failed to seek help from the board before taking the matter to court.