On the one hand it’s a little disappointing when I take the time to post information on a Company that I am a long term holder of for other share holders to read, only to see it get taken down. On the other hand it’s a good opportunity to repost a better post with more information while within HC’s TOU.
So here we go again (with some added information):
LNG has enough cash to last this Quarter and management has said they are evaluating 6 options for raising liquidity; including the newly added options of taking on debt; entering into a joint venture or strategic transaction with a third party or; selling the Company’s assets or business.
It’s hard to imagine this funding limbo we’re presently in lasting more than another couple of weeks given management will want to keep their salaries in the next Quarter. Here are the options they’ve given us for raising liquidity:
1) Successfully marketing of offtake.... I doubt anyone believes this is going to happen this Quarter.
What do I think: No
2) Marketing of the OSMR technology.... If achieved, I doubt the funds raised would fund the company to financial close (probably enough for sumptuous lunches at Mortons Steakhouse though).
What do I think: No.
Shareholders should also be aware that last year the OSMR technology was already transferred out of Australia into a newly incorporated Delaware Limited Liability Company. I think this company is affiliated with the supposed new re-domiciled Delaware Company, Newco.
3) Debt funding.... I imagine we would be a very high credit risk in our current position and I imagine any lender would need to be satisfied we would reach financial close before running out of money again. I also doubt all the speculative market forecasts regarding BTA’s, SPA’s and FID that failed to materialise would give lenders confidence of us reaching financial close.
What do I think: No (Highly unlikely)
4) The sale of equity or debt converted to equity.... Seems unlikely shareholders will get an opportunity to participate in the sale of equity or convertible securities given remaining funds, time remaining to get the process underway and the unknown factor about whether the company has been able to secure a party to underwrite any shortfall. Another option would be the company selling a stake to another large investor, similar to IDG. Given the current share price, we should assume that a significant amount of shares would need to be issued to secure enough funding to get us through to financial close. This would lead to significant dilution for current shareholders. ASX Listing Rule 7.1 places restrictions on how much equity can be issued and under what conditions it can be issued, though it’s true that there are ways around these restrictions. In particular, shareholders may well retrospectively approve the issue of a large tranche of new equity, given the alternatives. It is however, worth considering the implications of the rule.
What do I think: Significant dilution, but the best option for shareholders! At least we retain some stake in the company and get to vote.
5) Entering into a Joint Venture or Strategic Transaction with a Third Party.... Presumably with a party that stands to benefit from Magnolia having all its permits. Our cash position weakens our negotiating position but our sites and permits are not easy to acquire, and are also expensive to acquire. I don’t like management’s involvement with DOE and Argo Global, I don’t like they’re history when it comes to transparency and accountability to shareholders and I personally don’t trust them!! This option means we are left relying on our management team to find a suitable partner and negotiate a good deal for us!
What do I think: No (Highly Suspect)
6) The sale of the Company’s Assets or Business
What do I think: Have funds been deliberately run down, leaving us with no choice but to sell our shares to a private investor? Or maybe even to management (through an MBO as evacuation posted on another thread), for a very low price on a take-it or leave-it basis?
Is this something management has been setting us up for all along? It’s not out of the question to me: get the business into a difficult position then sell the valuable parts of the business out of the Company, or sell the entire Company, to a private investor at a rock-bottom price?! It seems like a way to acquire a decent set of assets whilst management also gets to keep their jobs and salaries?!
I discuss LNG with many share holders; on this forum as well as with those I know personally. Many have expressed great anguish as a result of the ongoing and un-materialised forecasts. Many out there (some still holding very large amounts of LNG shares) are worried about what is coming next. Commentators like Foxdog, Monsieur Wilson and others have recently expressed their concerns; I have listed my concerns here, especially options 5) and 6).
Now a few other things I didn’t talk about in that moderated post:
The last Quarterly stated the BOD is obtaining assistance from legal and financial advisors. It’s worth considering if this could this be in preparation for the appointment of an Administrator. It’s also worth considering that we could be in the final stages of being set up for being low balled out of our investment, either through Voluntary Liquidation or a 'not so good proposal from one or more suitors’ (such as in option 5 above). Also worth considering is if management have worked out a way in which they could be re-employed to manage a newly formed private company!
A few weeks ago noairbags asked Why did Kinga Doris leave? She was responsible for all things legal: legislation, regulations, securities etc. Now they have employed new legal and financial advisors. Someone on the threads have suggested they already hadve a liquidity arrangement in place, so why a new team of legal advisors?
Monsieur Wilson recently commented on the difference between ‘optimists’ and ‘sceptics’. Of the optimists, I wonder how many think they haven’t already been screwed when it comes to their share value?! I can understand their approach to continue to trust this executive team manage the remaining value left in their shares, I just don’t share it!
As far as trust goes, I put it in the same box as accountability, credibility, integrity, factual accuracy, and open honest responsible and transparent communication to share holders.
As an example of this Company operations, I have provided a 'shortened' version of LNGL’s disclaimer below:
No representation or warranty is or will be made....in relation to the accuracy....of this document.... or the accuracy, likelihood of achievement or reasonableness of any projections.... contained in, or implied by, the Information or any part of it.
The Information includes information....that has not necessarily been independently verified.
Subject to any continuing obligations under applicable law or any relevant stock exchange listing rules, LNGL Group disclaims any obligation or undertaking to disseminate any updates or revisions to any forward looking statements in this presentation to reflect any change in expectations in relation to any forward looking statements or any change in events, conditions or circumstances on which any such statements were based.
....each entity in the LNGL Group, along with each entity’s respective officers, employees and advisers, excludes all liability (including in negligence) for any loss.... which may be suffered by any person as a consequence of any information in this presentation or any error or omission there from.
What’s worth remembering is that this disclaimer does not absolve LNGL from its legal obligations under the Corporations Act or ASX Listing Rules.
Once again I will list 10 statements made by management between 2016 to 2019 forecasting finalizing binding offtake agreements, achieving FID and / or beginning construction.
12/16 “Finalizing LNG offtake agreement efforts”
01/17 “Moving to finalize firm offtake agreements in the New Year”
03/17 “Forecast FID in July 2017”
03/17 “Construction on the Magnolia facility is expected to begin later this year”
06/17 “Expected to have the whole facility contracted in the next 6 - 12months”
08/17 “Likely finish selling remaining capacity at the Magnolia project by the end of 2018”
10/17 “Confident of signing offtake agreements with credit-worthy buyers later this year or early in 2018 03/18 “There’s ‘real potential’ to get a final investment decision by the end of the year”
10/18 “We remain confident in our ability to reach FID whether or not China participates”
03/19 “Expected to make FID in the second half of 2019”
The statements listed above were not reliable and objective, and when those material statements didn’t materialise, we got further speculative statements such as “No one is horse trading, It’s not a matter of if it’s a matter of when, In discussions for more than three times the 8mtpa capacity of Magnolia, Contract talks have picked up significantly this year, The phone was ringing off the hook, Expect to make that call by the end of the year and so on, and so on!!
Share holders here know my views on trust, accountability and transparency regarding this Company, and I think share holders are hoping for either the sale of equity to someone like IDG (followed by a NASDAQ listing as Monsieur Wilson suggests) or a takeover (probably a low ball takeover), either way, with the SP at $0.11 I view us as having already been taken for a ride for the last four years.
I also view the worst case scenario would be if management put any liquidity raising off until the Company goes into administration and is sold off for a fraction of its worth, only for management to be re-employed to run the company again.
In the absence of information from the company regarding the above, share holders continue to feel a sense of anguish. My comments are so share holders consider the above, not for them to sell. What share holders should do is hold management accountable for what has happened to our investments.
Finally, I apologise for such a long post and for having to repeat some previously expressed points, believe me I do have better things to do!!
As usual, time for a coffee
LNG Price at posting:
11.5¢ Sentiment: None Disclosure: Held
