Karen Knox Exports, Inc., is a public company located in Clancy, New Mexico. The Knox family still owns a third of the outstanding voting shares. Knox is the only company with reliable sources for its imported gifts. The company does a brisk business with specialty stores such as Neiman Marcus. Knox's recent success has made the company a prime target for a takeover. An investment group is attempting to buy \(52 \%\) of Knox's outstanding shares against the wishes of Knox's board of directors. Board members are convinced that the investors would sell the most desirable pieces of the business and leave little of value.

At the most recent board meeting, several suggestions were advanced to fight off the hostile takeover bid. The suggestion with the most promise is to repurchase a sighificant quantity of outstanding shares. Knox has the cash to carry out this plan.

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Suppose you are a significant shareholder of Karen Knox Exports, Inc. Write a memorandum to explain to the board how the repurchase of shares would make it difficult for the investor group to take over Knox. Include in your memo a discussion of the effect that repurchasing shares would have on shares outstanding and on the size of the corporation.