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Consolidation and shareholder concerns, page-3

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wingedwarrior

7,017 Posts.

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08/05/15

17:18

Post #: 15244592
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Originally posted by healyn ↑

A recent conversation with a person whom some shareholders may know and who is well acquainted with all matters EGO was centred around the subject “consolidation.”

This subject has been discussed in posts by a number of shareholders in various threads on Hotcopper but there has been no in depth conversation about it.

EGO's board has given notice that a consolidation of the company's shares will occur sometime before or at the time of the next Annual General Meeting which is in the December quarter.

Refer announcement 8April2015.
“As part of its strategy to improve the investment appeal of the Company and reduce compliance costs, the Board believe it is appropriate to conduct a capital restructure (share consolidation) at or before the next general meeting of Shareholders.”

There are a questions the Board should answer to concerned shareholders as the risks to the value of their investments in EGO are substantial.

1. The timing.
The share consolidation will occur at a time when the company is most vulnerable with the share price reflecting that vulnerability should any of the factors listed below come about.

. the Black Swan survey results may or may not be known or results may not indicate any substantial prospectivity to that already known or at best a minor increase in the number of prospective areas.

. depending upon prior drilling by other companies, the rig to drill the Red Gully North well may or may not be available to drill the well as scheduled. Any delay or difficulties encountered whilst drilling will be reflected in the consolidated share price to a greater degree than if the shares were not consolidated.

2. The Board has stated that it is “Shareholder return focussed,” If this is so why is the Board considering a consolidation at this time? Would it not be more prudent to await the results of the Black Swan survey positive or not and to drill Red Gully North, find gas in the quantities as has been assumed in various presentations and then consider consolidation from a position of relative strength.

Any perceived negativity by the market to any of EGO's actions post consolidation should any of the above points come to be, will reduce its market capitalisation from that at present and may open it up to a predatory takeover. Shareholders large and small will lose.

EGO's share price is extremely sensitive to any news, both good and bad, it would make sense to wait until the market is aware and fully understands the company's position particularly after Red Gully North has been drilled.

There are of course positives in a consolidation and the opposites may be true to the above points but that said historically it is known that many companies which consolidate their shares have their market capitalisation reduced compared to pre consolidation.

To this end it is proposed to arrange a meeting between EGO's Board and shareholder representatives at a mutually convenient time before the end of June to discuss shareholder concerns about issues relating to share consolidation and direction the company is moving to going forward.

Shareholders are invited to post on this thread concerns they may have about the subject matters which will be collated and brought to the table for the attention of EGO's Board.

Please no whinges or spurious comments

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I'm happy with the board's reasons & it's initial understanding of timing concerns. No doubt there will be other concerns including effect on the new options, buy-back arrangements and maybe ERM obligations. Personally, I'd rather see this finalised quickly while the sp is ridiculously low, the optimism and potential reasonably high (for a change) and some promising good news likely to be on the horizon post consolidation. I see no future being a holder in a junior with a ridiculous number of holders, issued shares and an sp that is a big red light to future major investors, farm-in partners & financial backers.
I realise others might disagree based on experiences elsewhere, but under the circumstances, I feel EGO is entirely a different kettle of fish & this step is a priority imh but humble opinion.

EGO Price at posting: 0.5¢ Sentiment: Hold Disclosure: Held
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