An Embarrasment of Riches, page-13

"In MND's case, the dilution factor of 20% over 12 years is actually one of the better ones in ASX. The list of companies with a dilution factor much higher than this is very long."

@travelightor,

Respectfully, I think that misses the point.

Benchmarking against a pretty crappy sample is no measure of stewardship of the issue capital of a business.

What the becnhmark should be is what the realistic alternative could have been.

And in this case, MND being such a prolific and consistent generator of surplus capital, the alternative is that MND could have allocated some of that surplus capital (it wouldn't require much; merely a slither of it) to neutralise the equity that was issued to staff and managers as a means of incentivising them, and for the various small acquisitions that have been made.

In terms of incentivisation equity, I'm a huge fan on skin in the game, so I'm not opposed to equity participation plans for those in our company who add value, but it strikes me as totally incongruous that we today sit with a bank account stuffed with cash (embarrassment of riches, remember?), and at the same time there is today 20% more equity that participates in the fruits of the business, and which will do so to perpetuity.

That options have been exercised at a higher price is not very relevant, I don't think, and is quite circumstantial; it merely reflects what the share price has done subsequently as a result of a collapse in the commodity cycle.

Besides, if the dynamic - of staff and managers exercising options only to have them lose money in doing so - is meaningful then, as an incentivisation strategy, it is flawed, because it will mean that our manager and staff don't profit from the scheme in the way that it is intended (i.e., "As an employee of MND, I can work as hard and diligently as I like, but if the iron ore price suddenly has a conniption, then the incentivisation component of my remuneration structure is worthless").

Ditto for options expiring out of the money.


"Back to the DRP, now that I'm a shareholder, and considering that MND is currently swimming in cash, I prefer for the DRP to be suspended indefinitely. If they don't have any intention to do this, then I intend to participate in the DRP as long as I consider the current share price is still of good value. The moment the share price goes out of the bargain territory, then I will suspend my DRP participation and opt for cash."

Yes, agree.

Again, why on earth does this dripping roast of a business (even at the bottom of its business cycle), have a DRP in place in the first case? It's plain nuts!


During the boom, they didn't do any silly big acquisitions and since the peak in 2011/2012, they haven't blown their piggy bank. Therefore, I have to give them the benefit of the doubt that they won't do anything gung-ho in the future.

What, then, do you think they will do with the cash, in that case? (not a facetious question, but quite a legitimate one, because I'm at a loss s to the answer.)


"This year, MND actually bought a small company called Evo Access. They didn't bother to announce the acquisition. We found out about this from the Appendix 3B, which shows MND issuing 13,750 shares to the vendor as part of the acquisition. Why bother issuing $100k worth of shares when you have $200m in the bank? The only explanation is the vendor must have insisted for part payments in MND shares."

Yes, I saw this but didn't reference it specifically in my debut post.
Again, it makes no sense.

For I doubt that any vendor specifically asks for MND shares as payment. Especially as the shares involved were issued at what looks like zero discount to the market price.

And, if memory serves, half of this stock that was issued for this acquisition was escrowed until June 2018 and the other half to June 2019.

So, I'm 100% sure no one who sells a business says, "No, thanks, I won't take my payment in cash. I'll take shares in your company instead. Oh, and another thing, unlike the flexibility that cash gives me, I want to be denied access for those shares for the next 3 years" (?!)

Granted, very small amounts involved, but still perplexing in the context of things.

Besides, as is proven, all these little small amounts add up to a meaningful figure over time.