Good debate this week Anthony. I agree with you on debt being a better option to equity, I suspect the PFG deal prevents it (I don't know, I'm guessing). I was wary of the PFG deal when it happened, those kinds of deals can be predatory, but it wasn't too large in the scheme of things and it got cash in the coffers. I'd definitely like to see it paid out sooner than later though. It is the one thing I would chastise management on. That said, I'm still perfectly fine with the company accessing more capital in this most recent round, even as equity, because of the growth trajectory it puts us on, there is a return on investment for this raise that, frankly, I can't find anywhere else from what I've seen. If some of it is being used for operational expenses, (and I'm being genuine, I don't recall seeing anything from the company that says it is, happy for you to point this out to me) it's a non-issue for me because the economics of the business case are so good.
But, if they don't generate growth, I'll stand shoulder to shoulder with you calling for their heads. I don't think that scenario will eventuate though
I really do believe this management team is being tarred with the performance of the old team in commentary happening this week by various posters. No arguments at all from me that there has been severe dilution over the years, and miserable performance. I've suffered it too. But I don't think it is fair or reasonable to judge this team by all that, only on the results they are delivering since coming in themselves, and by that account the numbers under this team do tell a good story to date. Yes we need to remain vigilant - I certainly will, I've put a significant amount of money in and would be a fool not to - and hold them to account. But I'm approaching that from the perspective that I expect them to do all they can to manage things in their control, and some things just aren't (regulators being a great example of where delays can occur in spite of best efforts, but even things like when sales orders come in are subject to delays because of a hundred different factors). I'm also willing to acknowledge that mistakes can and do happen, and is part of the risk/return equation of investing in businesses. It's why the quality of management is so important, so as to mitigate this as far as possible (but never completely), so when they do happen (and they will) they're not fatal. This is also why I think the
trend in business performance is key; in any particular quarter or even half year the company could get lucky or unlucky, or there could be a screw up, either way it likely won't repeat and the trend should resume. If not, that's when alarm bells start to ring. To a fairly large extent the share price isn't something they can control either (and I want them focused on building and growing the business, not fretting daily over the share price, because that's how long term wealth will be generated). So far, those types of behaviours and the corresponding business performance are what I see them doing and achieving. It's a very encouraging trend - increasing top line, controlled costs - perfect.
I said in some other post this week I've been burnt by bad management in the past, unfortunately more than once albeit in different ways, and it makes you very attentive to what is being said, if it makes sense or is just spin. So far this new management team has been one of the most transparent I've come across, they are putting in the public domain material not normally seen, and providing the information needed to assess your investment on an ongoing basis, understand their strategy and put it through the "sniff test", and, really importantly, assess their performance. Their story and the results they are achieving are matching up, and give me a lot of confidence they can and will deliver on their strategy going forwards. They've set expectations, and I know how I'm going to measure their performance.
I've posted way more this week than I normally do, will go back to my more usual quiet mode next week...there's stuff to get done. Rather than saying "good luck" etc, my ask of people would be to take some time out to carefully review the last few company presentations again, test the narrative against the businesses performance and whether it lines up, and use those conclusions to form your own view of the go forward strategy and the company's ability to deliver it. In my view it would be the most valuable way to spend time in respect of your investment in this company. Cheers.
And one last time...sentiment: mad to sell, madder not to buy!
(20min delay)
