CMIPC shareholders would be committing financial suicide to vote...

CMIPC shareholders would be committing financial suicide to vote against the 95c buyback.

WQL, your argument about dividends on the CMIPC is flawed. Everyone knows that CMI Limited is generating strong underlying profits and that it is in a financial position to pay dividends if the directors so choose.

But just because CMI is making strong profits does not mean that CMIPC holders will receive a dividend. Note the NPAT of $13m in the 2011 year, where no dividend was paid. CMI’s directors do not rely on the lack of profits as their justification for not paying dividends. They rely on clause 30.4(a) of the CMI constitution, which says that the payment of a dividend to CMIPC holders is subject to the directors, at their discretion, declaring the dividend to be payable. These directors will not pay a dividend to CMIPC holders, regardless of how strong the profits are.

A defeat of the buyback resolution will be playing right into CMI’s hands, as the CMI ordinary shareholders will receive free equity from the CMIPC holders for many more years to come, thus perpetuating the super charged returns for ordinary shareholders. The directors would love it if this buyback were defeated. The only reason that this buyback has been proposed is because the CMI directors have been dragged kicking and screaming to the table by Trojan Equity.

Additionally, it is unlikely that Trojan Equity will continue with their litigation – if you take a look at their financial position, they do not appear to have the necessary funds to continue the fight.

What this all means is that if the buyback if defeated, there will be a dramatic fall in the CMIPC share price. There will be no dividends, as the directors continue to believe that payment of CMIPC dividends is at their discretion and CMIPC holders will be destined for many more years of misery.

If you really think that CMI ordinaries are going to $5 (and I agree with you), then simply accept the 95c and re-invest the proceeds into CMI ordinary shares. I would have thought doubling your money is much better than halving it!

Any group intending to vote against the buyback at 95c would need to ensure they had a fighting fund of around $3m and the time and energy to launch a major legal case against CMI, because CMI is not going to voluntarily start paying dividends or launching another buyback without the threat of Trojan’s legal case over their head.

WQL, do you have a fighting fund lined up and who is going to run your legal case? I think it is only fair that you can answer these questions before encouraging other CMIPC shareholders to vote against the 95c buyback.