Management is clearly using COVID-19 as an excuse to rebase the business. MRG is the only company in this sector that I have seen provide multiple updates regarding COVID-19. Management jumped on this theme early as a way to explain away the failing business. However, following this second announcement it is obvious they have overplayed their hand. Undoubtedly the modelling done by the advisor on the previous two capital raising has used very optimistic forecasts in order to get both these capital raising complete. The reality that those forecasts would ever be met was laughable. The blame game from management just continuously perpetuates. Firstly it was Jamie and Erling's fault, then it was weather then water, then the government's fault regarding water plus a raft of others.
Current management has not stepped up and taken responsibility for the significant errors it has made. The unprecedented cash burn, the incredible turnover of farming staff, the long-overdue launch of new products. There is a real lack of accountability and given the structure of the recent capital raising, corporate governance. The fact that the CEO did not take up their rights during the capital raising is egregious. The recent CFO's departure adds to the concerns around what is happening day to day at MRG.
Why hasn't the CEO taken a pay cut? For a CEO of a listed company to be making $500k a year and not take a pay cut in the current environment is inexcusable. CEO's across the country are taking it upon themselves to take reduced salaries due to COVID-19 yet the MRG CEO has not? Where is the social responsibility of this management team and board? I think reputationally it will be incredibly difficult for this management team to redeem themselves especially following this final point.
The only way that this company can rebase / clean slate is to start again with a new Chairman and CEO. I am ok with Thorney being the puppet master with MRG given their significant investment/lifeline, however, I do expect them to step up and make the difficult decisions. The time for those tough decisions is now.
MRG Price at posting:
1.1¢ Sentiment: None Disclosure: Held
