The loan should never have been paid out in shares in the first place in my view...period...I don't care what some might offer in support of rewarding those who lent the Company money when they needed it...they were already very well rewarded even before this "gift".
We need to remember, the lenders were "granted" a near 40% return on the original loan amount via an options sweetener from day 1 (this was well over a 150% annualised return when the options were 10c)...and they still enjoyed the 10% interest (was it compound?), on the principal sum...and if that was not enough, had everything gone wrong (ie, had the Company not been able to repay the loan), they were always able to convert the loan to shares at a price that would easily have facilitated a "generated exit"...and at a considerable profit to boot!
I have read plenty of support on here for this deal (to pay out the loan via shares)...but not one argument put forward that would actually hold up under independent audit!
There is a simple matter of fiduciary duty here...the interests of shareholders must always come first.
Were there any other reasons the Company may have elected to pursue this apprently less than optimal approach, in spite of the apparently poor outcome for shareholders?
The most important thing to remember here is that the Company was not actually bound to pay the loan out in stock...they could have easily done so via cash (raised above 20c+ from any number of brokers who would be happy to oblige in a new play like this).
So...why did they do it?
Had CEL elected instead to pay out the loan, the lenders would still have been happy in that they get their loan paid out AND still earned some interest in the deal, AND also managed to walk away with a pocket full of options which at 10c (prior to the capping activity), gave them something like a 150% annualised return on the deal, in addition to the interest earned and other "lending charges" that would no doubt have transpired in an early pay-out!
In this arguably more reasonable scenario, the lenders could then take advantage of the new relationship they had developed with the company...and use it to take first dibs in future (fairly priced), share issues.
Further, if the company had elected to pay out the loan via cash raised at say 20c, we would have something like 10% less shares on issue, and the wider market would now view CEL as investment grade...AND...the "lenders" would still have walked away with an annualised return well over 150%, on a lending "punt" that was never really a punt in the first place given all the safety nets they had put in place.
By any measure, this would have been a fair and reasonable outcome...both for the lenders and the company (read shareholders)...but no, for some strange reason CEL elected to improve on this deal even further (for the lenders), with yet another 100% bonus (annualised to well over 300%), to the apparent detriment of shareholders via an additional 10% dilution.
I cannot see how anyone could possibly argue the merits of what has transpired here?
As for the current flat-lining share price, and obvious hammer that keeps appearing every time the stock wants to run, on the back of what appears natural market forces...I suspect this may well be a direct result of combination of "back-of-house" corporate activity and a current lack of "investor attraction" to a stock apparently being subjected to questionable antics.
In fact, I would not be surprised to learn they are trying to lock away the 30m share placement (approved at the recent GM), at current levels, rather than wait for the stock to rise before hand...which might also explain the apparent "effort" to keep the price from running...just yet.
Of interest, it may also shed some light on the entirely unexplained spike in price recently (which saw a massive hammer appear)...did some undisciplined types prematurely react on market to the prospects of a placement being agreed to behind the scenes?
Whilst the above may all be speculative opinion, we are in my view seeing plenty of anedotal evidence in support therof.
I guess time will tell.
Cheers!
CEL Price at posting:
17.5¢ Sentiment: Hold Disclosure: Held
