The all-important Phoslock Extraordinary General Meeting (EGM) loom large, with the consequential event being less than a week away.
Bear in mind, however, that if you are not planning on attending the meeting in person, an online vote needs to be submitted by Tuesday morning (10:30 is the cutoff, as I understand). My suspicion is that only a minority of Phoslock shareholders will attend the meeting, so at time of writing, most shareholders will only have a few days remaining to submit their votes.
Based on the information outlined in the recent Phoslock announcements, shareholders have basically got two options at the EGM: On the one hand, they can give the tick of approval to the proposed wind-up of the company, involving the sale of the company assets and eventual delisting of the company. Upon completion, this might result in a final distribution to shareholders of between 1.7 to 2 cents per share, though as is noted on the EGM form ('Notice of Extrordinary General Meeting/Proxy Form', 15/12/23) the quantum of the final payout ultimately depends on a range of unspecified factors.
The second option for shareholders is to reject the wind-up and delisting proposal, and appoint a new set of directors, namely Bart, Van Boheemen and Newing.
Because shareholders are required to vote for or against each nominated director individually, in theory, this could result in a curious situation in which the new board of directors is comprised of a mix of old and new directors. How likely this is to pan out, I can not say.
I think it is fair to say that most shareholders are in the dark with respect to the true situation of the company. Indications about the state of the company been inconsistent over the past four years, and it is quite difficult to accurately assess whether the situation Phoslock is in is truly terminal (as the current management seem to suggest) or if the company can eventually be turned around.
As for the plans of the alternative board, most shareholders know even less.
In light of this, I took the initiative and last week made an effort to get in touch with Graeme Newing, one of the proposed new directors, asking him if I could put some questions to him about the company and the prospective plans of the new board, in the event that they are elected on January 18.
He kindly agreed to speak with me over the phone one afternoon. I've listed below the questions I asked and his responses, based on my recollection of the conversation.
While I've aimed to provide accurate responses below, it should be noted that these are based largely on my recollection. Please bear in mind that the information below might not be exhaustive or entirely definitive.
I should also mention that I didn't inform Newing about my intention to post his response on this forum, and I do so now at the risk of getting him offside. That said, I strongly feel that it is imperative for shareholders to have access to as many details as possible prior to making voting decisions, given the general dearth of information.
Below are the ten questions I mooted, with the answers (as best I remember) below.
1. My understanding is that a 249D motion requires the support of shareholders (or a shareholder) holding at least 5% of a company's capital. How many shareholders were behind the 249D notice that was first mentioned by the Phoslock management in early December?
Twenty shareholders in total.
2. In the 'Notice of Extraordinary General Meeting' form of the 15th of December, the management state that the proposed wind up transaction represents the best path forward, given the company's current circumstances. I take it you would beg to differ?
Newing answered in the affirmative, and said that he would like to bring back the experienced people who were terminated by the current management. He also said that, while the previous arrangement Phoslock had with Sepro was far from ideal, he thought that it had been a mistake to terminate the agreement with Sepro.
He stated that his priority would be to reduce costs and sort out the financial obligations of the company. He also made the point that as an outsider, he was not privy to all the details.
3. On that note, do you believe it would be feasible to attract a suitably qualified CEO and CFO who would be willing to take on roles at Phoslock for a more modest salary compared to that of McKinnon and Parker?
Graeme said yes, he was confident about this.
4. Phoslock has never had a top-tier manager with a background in water remediation or environmental services. Assuming you are successful at the EGM, would you prefer to appoint someone with a relevant industry background to the top job?
Again, he said that this would be his preference. He also made the point that he would like to appoint a China manager with a background in water remediation.
5. Is the estimated capital return, of 1.7-2 c per share, the best outcome for shareholders, as the current management have suggested? Do you think this is reflective of fair value?
He said this was hard to determine as it was subjective. Again, he pointed out that as an outsider, he wasn't cognisant of all the particulars.
6. Assuming you are successful, do you think a share consolidation will be necessary?
He said he can't answer, not being privy to all the details. Also, this would ultimately depend on whether the company remained delisted or not.
7. On that point, do you think you think that Phoslock shares will be able to resume trade on the ASX?
Newing stated that one possibility that they were looking at was shifting Phoslock to a secondary market. In the interim, they might de-list Phoslock from the ASX, in line with a drive to reduce costs.
8. What did you make of the report about Phoslock that was featured in the Age and the Sydney Morning Herald just prior to Christmas?
He said he thought it was a beat-up. He also made the point that it's a commonly known practice in China for the government to take a cut of lucrative contracts.
9. Do you know who leaked the emails to the media?
Yes, he said he knew who was behind it, but he couldn't comment further.
10. Do you have much contact with the former Phoslock Chairman, Laurence Freedman?
He said he has some sporadic contact with Freedman, as both are shareholders in another listed company, Audio Pixels.
I don't intend to comment further on Newing's responses; however, the one thing I will add is that I was quite surprised when he stated that the 249D action had the support of as many as twenty shareholders.
Something I noticed when I was reviewing the EGM form, was that the second item, 'Approval of delisting', needs a 75% vote to get passed.
If Newing is right about having the support of 20 shareholders, my guess is that McKinnon and co would have a snowball's chance in hell of getting that second resolution through. Even the first resolution will struggle to get majority shareholder approval, I would suspect.
I wonder: could this possibly explain the leak of the internal emails to the media in December?. Perhaps the current management had already realised that the writing's on the wall, and thus the leaks might have represented some kind of last ditch effort to salvage their reputations?
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