Heads or Tails bet.... (Heads = Palisade), page-8

I have scant knowledge of finance, and failed accounting at university, before scraping through the second time. It's not my forté. Full disclosure. My opinion shouldn't be taken as anything but an uninformed comment. I'm probably wrong a lot of the time. I simply enjoy discussing stocks I'm familiar with. My opinion is maybe a bit obscure, and out of left field. With that said....

My view:

That 40% stake (was 50% before the cap raise and two convertible notes) was an artificial creation, made from nothing, and decided upon in an office two-plus years ago when the founders sat down with Ord Minnett (I can't remember) or whichever investment bank helped DEL to list. Someone decided DEL was worth X amount and the founders were apportioned 25% each. The shares didn't cost the founders anything, and really just ensure they maintain control of DEL despite it being a listed company. It's possibly a cynical way for me to look at it. I imagine it was decided by negotiation and could easily have been 40% (founders) 60% (for sale as IPO shares), or any other configuration.

If they'd put hundreds of thousands of dollars into DEL before listing, I take back what I wrote. But Jandekot was completed 8 or 10 years ago. We know the history of BLM and NZ. SA1 had been hanging around and worked on for a few years. They set-up Delorean Retail, which would have been capital lite. Just some software and a few salespeople and IT support. DEL was/is in a fairly embryonic state. They decided to list on the ASX using the carrot of BOOM sites as future projects, and structured lucrative jobs for themselves to get the projects built. If all had gone well, or even halfway well, I probably wouldn't begrudge the salaries. I'm not even arguing they're lazy or not working 16 hour days trying to get the projects started. They could well be. I obviously have no idea.

If they were currently buying shares on market, or were taking $90k a year salaries, participating in a dividend reinvestment scheme, or had personally put a million bucks into funding DEL before listing (maybe they did?) my view would be different.

They didn't really list in April 2021 with much though. Two financially underwater EPC sites in progress, the reseller division, and big future plans for the BOOM sites. I can't see anything being put into this business by anyone, aside from the $5m from Palisade and perhaps some Brickworks consultancy fees. Only salaries and costs being taken out.

YOU, and I have/had our capital at risk though. WE had to buy our shares with money we worked hard to earn. Arguably, we have/had much more skin in the game than the founders. It's not like they are in our situation. If the company fails, they walk away, and their shares are worth zero. "That didn't work. Oh well...". In the meantime, while DEL is operating, they're collecting $300-350k+ a year indefinitely, in jobs most of us would grab in an instant. They've bought themselves a great position which they can't be fired from, and lasts as long as DEL does. They'd likely be unscathed, debt free, and get new jobs in a growing industry crying out for experienced workers. On to the next project. Very cynical of me.

It's not like they could realistically sell in the next few years to cash in their 40% holding, but if the company were to become very successful and valuable, or taken over by Cleanaway or private equity, they become very rich men. It's all upside, and no downside for them, with plum jobs as a safety net in the meantime. Where's the risk?!

I'd liken their position to going on a lunch break in your $30k a month job, and finding a plastic bag on the street, full of lottery tickets with *potential* jackpot winners inside. Later in the day, you lose the bag and any potential jackpot from a winning ticket(s). Nevermind. It was never a guaranteed win anyway, and you paid nothing for it so no big deal. Nothing really lost. You shrug your shoulders, call in to Starbucks, then go back to the office.

It is obviously a quiet evening for me! Enjoy your weekend.