Ann: Acquisition of Silverlink and Capital Raising, page-181

"nonetheless I’m most interested to hear whether the stewards of ALC responded to your letter and their thoughts on the matter - if you care to / or at liberty to share them."

@gold1650,

To the credit of the company Chair, I received a prompt response (the very next day, I call, or maybe the day after).

I'm not sure it would be appropriate to share the letter I received from the Chair on a forum such as this, as I think that would not constitute good faith engagement on my part.
(What I am happy to do, though, and I don't think it constitutes bad faith, is append my correspondence to the company as an open letter.... see [*] below)

But what I am happy to say is that the response was not just a "fob-off"; rather it presented a most comprehensive and thorough account of the Board's thinking behind the capital raising, both in terms of its timing and structure.

There are points in the response letter with which I do not agree, on pure arithmetic grounds, such as the extent to which retail shareholders were diluted in the raising (even if they took up their full entitlements), but Ms Wilson's letter drew awareness to the locked timetable relating to the Silverlink acquisition and relevant continuous disclosure obligations around that. So the Board's prioritisation of expediency was clearly articulated.

I think the directors and management were also somewhat spooked by the emerging Omicron virus at the time and its possible impact on capital market receptiveness.

Of course, in hindsight it is easy to say they acted with undue haste and could have afforded to apply more finesse in their interaction with the market, but at the time they probably - and reasonably - thought, "We can't be shilly-shallying on such as seminal transaction; we need to close this thing out." And I now have a degree of sympathy with that.

But, as a shareholder, I would have preferred a more considered approach, but that's moot now, because the egg can't be unscrambled and it will forever remain a, "You went too low on the issue price" - vs - "No, we had to make sure we raised the cash", kind of thing.


[*]

Dear Ms Wilson,

STEWARDSHIP OF SHAREHOLDER CAPITAL

As Chief Investment Officer of my family entities (XXX XXX et al), some of which are shareholders in Alcidion, I write this both as an introductory letter as well as to share some reservations I have about the capital raising currently being undertaken by our company.

First, about our family office: Formed in 1994, we are deep value investors, purchasing shares in companies when we believe they are fundamentally undervalued.

As opposed to being mere stock market “punters” chasing short-term investment gains, we have a philosophy of long-term business ownership; the average holding period for the companies we own is close to ten years.

We subscribe to the OECD's Corporate Governance Principles, as well as the framework of the United Nations Principles of Responsible Investing, which cause us to be caring and engaged shareholders, having concern for the welfare of employees, and regard for the reputation of our investee companies in the eyes of customers, suppliers, legislators, and the communities in which our companies operate.

As such, we consider corporate sustainability and high standards of governance to be paramount, and we consider ourselves to be patient and supportive shareholders to those ends. That support includes a preference for leaving the people who manage our companies, alone to do their jobs.

But when appropriate, we engage with our managers, in candid and constructive manner.

The matter that I feel compelled to raise with you relates to the capital raising currently underway.

In summary, the fact that the majority of the $55m being raised takes the form of a placement – at disconcertingly steep discounts to the last traded price and 5-day VWAP, preceding the capital raising announcement (and at even steeper discount based on the more representative measure of 30-day VWAP) – means that existing shareholders are incurring meaningful dilution of their interests in the company, even if they participate fully in the entitlement offer.

The equity market is the ultimate arbiter of these sorts of things and that the share price has fallen below TERP (at the time of writing, shares are being offered in the market at a level lower even than the $0.25 issue price), is testimony to the market’s disapproval of the mechanics of this capital raising and, by extension, the quality of our board’s custodianship of shareholder capital.

Unfortunately, it is easy for us to concur with the market’s adverse sentiment following the value-destroying capital management exercise being undertaken currently.

Directors and managers of our investee companies are appointed to protect our interests when it comes to dealing with purveyors of capital market products and services; yet, self-evidently, our board has not done so in this case.

Instead, it has facilitated undue transfer of wealth from the owners of the company to third parties.

Accordingly, kindly be advised that, while we currently have only a modest shareholding in the company which we had intended to build over time, following an investment committee meeting this morning we are reviewing that intention.

We are deeply disappointed by the apparent contempt with which our directors hold minority shareholders.


Cordially,

Xxx Xxx

.