Learnings

Dear (fellow) CTN shareholders

This is a short email mainly to myself about my learnings as a Contango CTN shareholder, and put in the public space on HotCopper in case it is any value to you.
I became a shareholder of CTN over 2 years ago in mid 2014 to a degree that was significant to me (but certainly not to CTN - I am a moderate minnow, if that makes any sense).

My reasons for buying (@about $1.10) at the time were:
- exposure to small caps (which were under undervalued wrt large caps at the time)
- good value in the small caps (moderate PE and good div yield)
- CTN gave diversity across companies (that I would not be able to get myself)
- CTN slightly undervalued (i.e. sp lower than NTA)
- CTN had good 5 year record (admittedly in the post-GFC rebound)
- financials plain and solid
- seemingly good and prompt reporting
I saw it as a long-term stable addition to my portfolio - i.e. no sleep to be lost at night, bottom drawer stock, paying reasonable divs purchased at fair price.

What I did not do was to do due diligence on the directors and management - this is always tricky to do, involves subjective judgements, and may not always yield "correct" answers - BUT the key underlying principle is that as a shareholder I need to be as certain as I can be that the directors and management of the company are running the company honestly, ethically and for the benefit of all shareholders.

Now since that time three things have happened:
1. I was party to a discussion at a company event at which time a prominent executive asserted that companies are under no obligation to pay company tax to the Australian government (or any government for that matter), and when clarification was sought, stated that profit shifting to no/low tax jurisdictions was good practice - it was very clear to me that there was absolutely no sense of obligation or need to contribute via tax to the nation or community; my antennae were raised - if no sense of this obligation, then possibly no sense of obligation to shareholders
2. I much belatedly had a look at past HotCopper discussions regarding previous actions by Contango, and came across some restructures etc and the comments of HC members - had I read these prior to buying CTN, then I may well have had some concerns about whether the directors and management of the company had been running the company for the benefit of all shareholders.
3. The current board spill matter - I have not been able to determine the appropriate course for me to vote, but the matter itself, the reasons that lead to it, and the discussion thereof on HotCopper have led me to be concerned about conflicts of interest, and whether the effectiveness and efficiency of operations is foremost in the minds of directors and management (as opposed to "clipping the ticket", our ticket).

So, I have decided that as a shareholder I cannot be confident be that the directors and management of the company are running the company honestly, ethically and for the benefit of all shareholders (and I have not been able to confidently form the view that the proposed new directors will ensure that happens).

I have existed my shareholding at a modest loss.
I do wish continuing shareholders well, and I hope that your company can be well directed and led for your long-term benefit.

So, two key learnings for me:
a. Do due diligence on the directors and management prior to buying;
b. Use past HotCopper discussions to help me do that.

So that's it for me on CTN threads - thanks for contributors whose views have helped me - and GLTH