(post prepared on word and copied to HC... formatting OK when written, so we'll see how HC processes it)
Hi Inchiquin,
Thank's for yourpost.... it's good that you put all your thoughts on paper, even iflengthy, as it helps define all the options and intricacies, focusthe mind. I'll try to constructively respond with my own thinkingand I freely admit I'm finding it a difficult decision to make.
I make no apology forthe length of this post. It is a big decision affecting significantwealth for many of us. If any reader has an issue with this, simplydon't read it.
On the subject of voting,I don't believe this to be an issue. As I stated earlier, the EGM noticeclearly defines attendance and voting as being by way of bothonline and physical presence. So if voting on the day is not possiblefor online attendees, then I believe the meeting will not comply withthe regulated requirements and will need to be rescheduled. I'veattended many meetings online and voted without issue so, as long asthey are using a suitable platform, it'll work ok.
Before airing mythoughts I should state that I bought my first shares in PET (PHK)not long after they listed. I was a biotechnologist in my workinglife, holding senior management positions. Through my scientific training I was immediatelyattracted to the CSIRO Phoslock technology, recognising its uniqueattributes and clear ecological benefits and need. ( all treatment results todate have proved this to be correct).
I have also been aninvestor since the mid 1980s and knew of Lawrence Freedman'ssuccessful exploits with EquityLink - he was a drawcard for meincreasing my holding in PET.
I attended all the AGMsin Sydney during those years and was impressed with his energy andunwavering support for the company. This was before China came onthe scene and I believe he kept the company alive on more than oneoccasion. I should also say the I personally did not take well toRobert Shuitema, but I had no knowledge other than a gut feel fromthese meetings. I do not believe that Freedman was party to all this corruption, but his wealth and status made him an easy target, especially from those with agendas seeking retribution.
SePro was my mainconcern when it first appeared as it was obvious to me that they weregoing to do what they in fact did in my opinion: hijack the technology fortheir own ends whilst accessing internal studies, results andthinking through their agency as a distributor. So my gut is againstgiving them the technology. And at $3million it is a complete andutter giveaway.
So I'm trying to arrive at a decision through the above lens and loyalties. I havecorresponded with Graeme Newing and Mathew Parker recently to try toclarify my thinking. I believe them both to be sincere in theircurrent and past actions. Mathew particularly was very open to all myquestions.
So my take on theoptions:
I don't like either ofthem, but we have to make a decision.
The current Board andOption:
I believe that thecurrent board and management have thrown in the towel rather easily. Why? All their commentary after re-listing was positive andenthusiastic until they received the external consultant's report. Ithink they became very concerned with the amount of perceived contingentliabilities, and also with their own reputations. The board membersare all successful legal and accounting professionals at the top oftheir games. They are not business people per se, and I'm sure theydo not want to risk reputational damage undoing their standing intheir respective professional communities. The CEO came from a largecompany and had the experience and approach of implementing globalstrategies for established and easily understood products. I believethis was too grand a plan to launch into from the outset. But to befair, had Covid and the corrupt behaviours not occurred, I think thatstrategy could well have succeeded...... and we'd all be singingtheir praises ( although of course in that scenario there would neverhave been a change of board and management in the first place!)
The company could havesurvived one kick in the guts but not two. Especially when Covidforced all governments globally to close their wallets. I share thisview because I still believe that the company can still succeed inthe business of phoslock ( and now with phosflow) remediation ofwaterbodies. What I believe has the current board capitulating istheir view of the risk that substantial contingent liabilities willcrystallise before the company can establish a sufficient post-covidearnings stream, hence bankrupting the company.... and damaging theirpersonal reputations.
IF proposal 1 isdefeated, but the alternative board is not elected, Krasnostein hasalready said that they will put PET into administration. SePro willpull their offer to buy ( and in any case can do so anytime up to completion around Feb21), and wait for theadministrator's fire sale. An appointed administrator is the veryworst outcome for shareholders, IMO.
The alternative Board:
They appear to want toresurrect the business. They certainly have done the bare minimum toget shareholders on side which makes me think that they already havethe required votes to defeat the current boards proposals 1 & 2.As Graeme states, they can't make informed comments on financialposition , options etc until they see the books. I do believe (through no other information) that Freedman is one of the twenty andhis 11% will be an important component of their support base. Itconcerns me that none of the three proposed board members own sharesin PET: see the EGM notes: Annexure A, section 2 (Biographies) Bartand Newing WERE longstandingshareholders and van Boheemen never owned shares. So of the 5% minholding required to force a 249D notice, the proposed boardcontribute exactly 0%.
Oneof my concerns ( see my earlier post Post #: 71493851) is that the new board could raise capital by firstly totallydiminishing any value in the existing shares, as they don't hold any and so have nothing to lose. But Freedman does - 69million, so maybe that would prevent theconsolidation strategy. But why would the new board want to put inthe effort to rebuild the company unless they intend to own a fairchunk of it in due course?
Howwill Shareholders recoup some capital?
Eitherway PET will be delisted. If proposal 1 passes, but 2 fails, PETwill remain listed but have no assets or business. ASX would force adelilsting, as Krasnostein states. And the new board will also delistto “save costs” and maybe avoid detailed reporting toshareholders ( which also has costs).
Votingaccording to the current Board direction will reduce ongoingliability risk, reduce further loss of capital and possibly provide a futurereturn of capital to shareholders. But as a lot of our money is stilltied up in China we have no idea how long it will take to get it out.Mathew doesn't know either as it's entirely up to the Chineseauthorities and they're not usually eager or prompt at sending funds overseas at thebest of times. Maybe we'll see something in 2024? Unlikely IMO.2025? 2026? Hopefully before any contingent liabilities crystalise. So a decision based on getting some money back in the near term from this strategy maybe a bit naive.
Votingfor the alternative board would mean that we still have a business,but few staff to run it. No value in the shares as the fundsunderpinning them will be used to support the business, pay wages formaybe 2 years until new sales get established through new staff ( andare previous PET staff really going to give up their security to comeback on board such a distressed ship?). Remember the business is about providing solutionsto specific water problems on a case by case basis, and not simplyselling powder. It requires specialist skills and not a simplemarketing and sales pitch).
Mydecision could still go either way. And I'm running out of time! Like I said, neither option is good forshareholders. I'd like to believe that the new board to re-energisethe business and sell this fantastic and desperately needed product.But I don't believe my 2.5million shares will ultimately have anyvalue once the company is re-capitalised ( unless by way of debtthrough their multi millionaire top shareholders and newdirectors????), so maybe I should sell now and get a fraction back. Unlikelyto be even 1.5cps in the end.
Allout of ideas and thoughts
Cheers
(20min delay)