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2.5¢ phoslock environmental technologies limited

All good points. A lot of questions surrounding all of...

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Shortblack

696 Posts.

451

02/09/23

19:36

Post #: 69705337
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Originally posted by WaterFall9: ↑

Love your work Shortblack. As always detailed and well reasoned.
I have a lawyer friend now retired who has done work on director liability and class actions and has a small PET holding in his SF. We have discussed most of the key issues over some drinks.

Has the issue of fraud been established by the company?. KPMG state in there 2020 audit report that the company never provided them sufficient evidence that transactions the company identified as fraudulent were in fact fraudulent. Usually in CA actions the auditors as soft targets and settle quickly. Given KPMGs well thought out handling of the company’s fraud claims, he believes they would defend any legal challenge vigorously.

$30m cap raising in Q2 2020. The issue documents are the key. He assumes that they would contain usual safeguard type language. The company used forward looking statements based on some of the pipeline being converted into sales. It would be strongly argued that Covid materially impacted future sales. Most customers were govt type organisations. There funding for environmental projects was redirected to health measures and economic stimulus.

Director selling in late 2019. The argument to be made is that Directors sold shares knowing confidential information not disclosed to the market. Timing of the sales is very important. These shares were made after the release of the June 2019 audited accounts and investor presentation package. This was a trading window. Hence it’s hard to know if the directors held any additional material information not already disclosed. The other issue relates to forward looking statements at the time. Were they justifiable or were they optimistic. Did external factors like Covid significantly affect the company and its ability to make sales.

2 year trading suspension. He believes that there was a point in first half of 2021 when KPMG would have advised PET of the audit issue above. PET could have agreed with KPMG at that time and been easily relisted. The company choose not to, instead spending millions upon millions ( we may never know the amount) on lawyers and accountants. The board , all lawyers and accountants themselves, would have been pre-occupied by this issue. One wonders what focus there would have been on sales and technical issues.

The biggest issue confronting the company was its inability to sell Its products, even as Covid issues decreased in 2022. McKinnons decision when he took over in 2020 to shut the Sydney office, relocate to Melbourne, sack nearly all of the long term PET employees and then damage long term relationships with sales partners in US, China and Europe, significantly impacted the business. The new staff hired by McKinnon have failed to deliver meaningful sales, hence the cash burn and now going concern issue.

CA issues are not clear cut and the various parties have deep pockets to defend any claims. A number of the parties value there reputations, so will defend themselves regardless of the cost. It’s all about picking your prey. Prey that doesn’t fight back is the best pray. They avoid prey that fights back. The cost-benefit soon disappears.

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All good points. A lot of questions surrounding all of them.

Nothing can really be established until the various investigations are completed, and the more investigation the better, which is why I believe a court appointed administrator is the best option.
ASIC should be moving to apply to the courts for this, it's the least they could do for shareholders.

The whole thing stinks and the sources of the odour need to be determined. Battle lines would be drawn from there.

PET Price at posting: 2.5¢ Sentiment: Sell Disclosure: Not Held
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