My research indicates that the Directorship will be extremely concerned by solvency issues following the adverse legal judgement and the resulting potential current liability of circa $10million.
It may be that the Directorship form the opinion that the company does not have the ability to pay its debts. In these circumstances the company will be placed into administration. There may be no choice.
The length of the suspension is material and indicative of the seriousness. I suspect the time is required to either secure additional funding and/or negotiate an equity settlement. Based on the history I doubt the company can find any further external equity funding and it would seem unlikely Porter would accept equity in a falling knife like SDL.
However the company may have a strong argument in settlement discussions of illustrating that if a settlement can not be achieved SDL will be insolvent and the directors will place the company in administration. In this circumstance my research indicates that Porter's claim would be an unsecured debt and so would rank behind the secured creditors and alongside the multitude of other unsecured creditors. As such his likely recovery in an administration would be cents in the dollar if anything. In fact I would think recovery for unsecured creditors would be zero. So he might be convinced to accept shares as a settlement. He would become the largest shareholder and would have trouble selling out given liquidity.
In the above scenario there would be no recovery for shareholders who rank behind all creditors.
This information may be informative for readers and posters who are considering buying stock or who are making inappropriate valuation calculations based on regional geo-political positioning or any (of which there appears many) who have forgotten that at current iron ore prices SDL would lose money on every tonne of ore it shipped.
J9
SDL Price at posting:
1.2¢ Sentiment: Sell Disclosure: Not Held
