The snouts are firmly in the troughYat is clearly a wealthy...

The snouts are firmly in the trough

Yat is clearly a wealthy individual. Back in 2017, he could have bought 20% of the company for about $3m, but opted not to. Not his finest moment, so he's now trying to double his equity stake through other means.

Seeking to award excessive share-based remuneration to Yat and ratify his future performance rights, whilst still unable to provide audited accounts or keep shareholders informed about the company's actual business performance is classic Animoca.

Resolution 6 – Approval of issuance of Shares to Yat Siu
Performance shares serve the sole purpose of incentivising people. IMO Yat and others should be generously compensated, but performance rights should always be set in advance.

A solely share-based remuneration is usually a very positive signal, but only if the issuance of shares is commensurate with cash-based remuneration. Up until very recently, as non-executive chair his cash-based remuneration would have been circa $200k per annum.

Sneaky accounting trick to mark the fair value of the 38,298,973 Shares at $76m. In real terms, he is getting compensated $135m+ for past performance. They've used the same trick for Resolution 7, which could equate to a US$1b+ windfall.

They’ve also conveniently neglected to mention that Yat has been compensated to the likely tune of hundreds of millions of dollars via all the token freebies from his "advisory" roles. How can he be advising on tokens issued by the company that he leads? The "double dipping" is a serious issue, as it disguises the totality of compensation. For every $1b rise in market cap, Yat might be pocketing $100-150m+. As things stand, we have no idea, due to the abysmal disclosures.

Resolution 7 – Grant of Performance Rights to Yat Siu
These performance rights are a farce. Milestone 1 is already in the bag and as the share base gets more bloated, then Milestone 2 is not much of a stretch target. Notice how the performance rights are weighted in favour of the first two milestones? It should be the other way round; US$10/20b market capitalisation are the stretch targets, so hitting these goals should come with the lions share of performance rights.

Reading between the lines, it seems like a US$20b IPO within 5 years is the ultimate goal that the company will be striving to achieve. I think that this is a much more realistic timeframe than those who are pinning their hopes on a NASDAQ listing in 2022. As I’ve mentioned before, the expectation from institutional investors is that Yat must keep raising money at premiums to the last raise. These performance rights make it crystal clear that this is the sole thing that he will be judged upon. Revenue/growth targets do not even get a mention!

One thing to keep a watchful eye on is the dilution from these performance rights and future cap raises. The rationale for these milestones is the significant shareholder value accrued from a 2.5-20x market cap from the raise price of A$2, but unfortunately this won’t translate to anything approaching A$40 per share for us if Milestone 4 is achieved.

The best thing about the General Meeting is that it provides an opportunity to ask plenty of questions.