A Hypothesis

I have been doing a lot of thinking about AEV of late and wondering exactly where the company and more particularly the share price is heading and what the long-term gameplan might be.

I have come up with a hypothesis about who is driving the agenda and what their objectives are. So I thought that I would test it out on this group.

I, like many of you, was dumbfounded when the last capital raising was done at a discount to the VWAP (24% discount in fact) and couldn't understand why the board would have decided to do such a thing given how much ground the share price has given up over the past couple of years and how positive their spiel was at the time. Not surprisingly the share price fell to and then below the capital raise price and has sunk further since.

So I started to wonder who this might benefit and came to the conclusion that it played into the hands of the two major shareholders Agrifos and Tablo Corporation who currently own approximately 43.7% of our company.

Now both of these entities are private companies and that is very much how their shareholders; of which there are very few, like to keep things, private. They do not like the paperwork and scrutiny that goes with publicly listed corporations.

It is my belief that both of these companies like and value AEV's assets, but they would be very much more comfortable if they didn't have to answer to the regulators and the likes of you and me, and therefore would very much like to take AEV private. The challenge is how to do that at the lowest possible cost? Simple, keep doing things that will tend to drive the share price down, like doing capital raising at a significant discount to VWAP!

We all know that another capital raising is on the horizon and the company will be looking to raise circa $53 M. I have done some analysis (which I would have attached if I could!) and if the same metrics apply in terms of a discount to VWAP, and there is the same percentage take-up by retail and Instos, post capital raise the two major shareholders will have increased their shareholding a little over 50% and if we assume a 20% takeover premium, then it will cost them slightly less than had they made a takeover offer; at the same premium, now. Of course, they will probably hope that the market would respond negatively to the discount to VWAP for the capital raise and they might achieve their goal at an even lower cost.

So I see AEV as a takeover target for its incumbent major shareholders and I see little opportunity for us, retail shareholders, to put upward pressure on the share price so that they at least have to pay a decent premium to the VWAP to obtain control or even make it too expensive for them to contemplate. The only positive I can see is that any offer would have to be in cash! I like many of you, entered this company in the heady days of 2010 buying in at around the $0.40 or $0.50 mark, so any takeover at current prices would see me and many of you take significant losses.

I hope that I am proven wrong, however, being objective it seems to be the most probable outcome at present. Hopefully, some of you will have a less pessimistic theory?!