Hi Aventurine,
lots to digest in your post.
As I said yesterday, these forums are great as it gives one the opportunity to test their investment thesis...and I for one, genuinely want people to disagree with my view point, and explain to me why they think I have it wrong.
Your PET example is just one way that this could have gone down.
However I just took a look at the top 20 and none of the directors hold a stake large enough that would justify that action. In my opinion, I want my BOD to have as many shares in the business so that they are aligned with me, and not reducing that position. This strategy works when management hold a very large portion of the register but that simply is not the case here.
If you would dare to humour me, then let me ask this:
What would everyone's reaction have been yesterday had the announcement read we have brought on R&B (I like that abbreviation by the way), it has been done at a 20% premium to VWAP at 1.2c?
There would have been joy and jubilation, and people would have been jumping on board trying to buy more.
So really the call on whether this was a good or a bad deal by management is focused 100% on the price.
Well I don't agree....whats the Buffet saying "price is what you pay, but value is what you get".
Yes R&B could have paid more, and that would have been great, but lets not discount the value that we get by them coming on board. Some of which we can not see at the moment as so trying to value the deal, or the stock itself right now is very difficult as we do not have all the information. The price they paid to get in will soon be forgotten, but the value they bring might be huge.
Yes those that subscribe to Modern Portfolio Theory and believe that the market is ultimately always efficient will disagree. Which is why trying to value VOR today by discounting future years income to an amount today is ultimately flawed in a fledgling microcap moving from years of loss making and capital raisings...to fast growing cash flow positive growth story.
Aventurine- my comment yesterday saying "I personally would have handled it differently" was before my colleague spoke with Gary. I was referring to a different approach. However Gary and Jeff were already all over it.
Without going into details, my colleague rang Jeff a few weeks before the first options were due to expire in August, as we had 1 buyer who was open to a discussion about underwriting all the options and so if these expired out of the money, this single investor would have bought them all. However Jeff said he needed to advise the market in advance that the options were being underwritten and that would have obviously given the market confidence and likely see the price rise above exercise price and then see them all exercised by the option holders...leaving our Investor out without any stock and having to pay higher to get on board.
So whilst I would have liked to see a similar outcome with R&B Gary advised that they tried to get that same outcome but could get the deal done that way. And understandably so, the moment Jeff announced that the next set of options are underwritten by these 2 funds....the price would have run, leaving them out again.
Gary and Jeff absolutely did what they felt was in the best interest of this business, and I am 100% sure of that. They are also both large holders and obviously want to see this succeed. They are playing the long game and isnt that what we all want?
Yes, anyone who is looking for a quick gain off a few pips is unhappy.
Me and my crew, we couldn't be happier with how this is playing out.
But again, open to others views and happy to hear reason and critical thinking.
10x
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