Whitecaps

"He hates Alan with a passion."

Hatred.

What a useless thing to be passionate about.

I find it more than a little ironic that I stand accused of all sorts of heinous crimes while my accuser, according to Blueprint - whose posts I enjoy - has all the while been hiding behind the scenes preaching hatred against myself and Alan while selling down what from all accounts was a significant holding. Especially when not so long ago we were being told - nod's as a good as a wink to blind man - that an offer of US$20 was just around the corner. Yeah right.

Takes all sorts.

From the time when he finally accepted Craig Thorley and Joe Kaal's request that he start up Unitract and take their invention to the market, Alan has been passionate about one thing, and one thing only - building a world class medical devices company. Now, fifteen years later, here we are listed on the Nasdaq with a world class Board of Directors and suite of world class injectable platform technologies, yet if much of what we believe is written here, on the brink of ruin.

To be honest, I read the 8k with some dismay, especially all the extra items like default on the lease at King of Prussia and payment to tradies etc. It came as a shock to learn we have been sailing closer to the wind than any of us thought.

For me, something has gone drastically wrong in fairly recent times re getting AbbVie or any of the others over the
line. Clearly, they were relying on those upfronts to fund the company through to production. David Hastings said as much at several Earnings Calls. Quite bullishly, as I remember. But it hasn't happened. Why? Was it something they could control? Probably not. Then came Imperium. Was Imperium a last-ditch effort to come up with a real game-changer - starting to dislike that word - that they could license for a big chunk of cash to help tide them over? AbbVie and Imperium combined could potentially have been the thick end of $100 million. Would've done the trick. Hasn't happened. Not yet, anyway. Not to say it won't, but for now we have to deal with what we have. Known knowns and known unknowns.

I cannot believe an executive of David Hastings' pedigree would have come on board had any of this been visible at the time he joined. So it has spiralled out of control reasonably recently. Yet Orbimed are still there. To what end? We've done $60-odd million already, and defaulted. In full knowledge of that, they signed up for another $60 million, now another $10 million lifeline. Why would they do that? Funny way to go about protecting your investment, throwing apparently good money after bad.

I thought the increase in demand for % royalties was the most significant revelation in the 8K - clearly Orbimed see royalties coming, and want significantly more for their increased exposure.

So, for better or worse, our fate is now in the hands of Orbimed and Morgans. Orbimed already have their seat at the board room table. Morgans too, though less formally. Like many others here, I cannot help but wonder if this entire situation has been engineered by a predator in cahoots with the Kerrisdales and Tilsons of the world. It's all a bit too convenient for my liking. And I don't like it. Remember how several of the Seeking Alpha articles came out within hours of company announcements? In one particular case, within minutes. Coincidence? No. They knew. But then, for it to really work they had to bank on other things going wrong, especially, but not limited to deals not materialising on time.

All I can say now is that I am grateful Morgans are there. Opportunities still exist, just not the ones we all thought when we started on this journey. Much will depend on the quality and quantum of what deal(s) they put on the table. If it is an offer for the whole company, then we will probably have to take it on the chin, and move on. If it is something else, convertible note, licensing deal, sale of parts, combination thereof, then the company finances should stabilise and....we move on. We will all have some decisions to make, and that's why we are all here.

I have not had any contact with Alan, or anyone else, for a while. That tells me something, I just don't know what.

The wonderful thing about HotCopper is that the vast majority of members are good, honest, decent people. Yes, we have different views on many things, but for the most part we get on, agree to disagree if we must, and move on. We share views, information and knowledge. We support each other in tough times. I like that. We grieve and pay our respects when we lose one of our community, like Yokka. And except where we have met at investor presentations or privately, and made friendships which endure, we are also anonymous.

I have mentioned previously that my situation is not what people may think. I consider myself fortunate to know Alan as a friend. Nothing has happened to change that, and nothing will. Despite the hatred preached by a minority, he is a good man who has worked tirelessly to achieve the vision that was set all those years ago. I don't blame anyone for where we are. I can't. I am not built like that. And I am glad I am not. I have said it many times, and agree totally with Mataranka's view that we must each take responsibility for our own decisions. Life is often not kind and we owe it to ourselves to make the best of the cards we are dealt.

To finish, if you have got this far I hope I haven't bored you witless, or earned further ire. I am a writer. As yet unpublished, but writing is my passion, and a worthwhile one at that. Following is a story I wrote a year or so ago when things weren't looking so good. Just goes to show if a week is a long time in politics, a year in the market can be an eternity. I hope people enjoy it. If I could ask anyone who reads it to take one thing from it, it would not to be so judgemental, especially when you are not privy to all the facts.

It is, of course, fiction.

Cheers.

Whitecaps
​

　
They were sitting in the shade on the veranda drinking whiskey and beer, listening to the Blind Boys of Alabama and the cracking sound of pine cones shedding their seeds in the blistering late-afternoon heat. The stand of pines was off to their left. Nine grizzly old radiata with a few younger ones coming through where, against the odds, some seeds had taken hold in the thin sandy earth. While the trees were home to a multitude of aggressive tuis and other lesser birds, it was Charles McKenzie’s considered opinion that trees like that had no place in a suburban environment. Occasionally in spring you would see a hawk come gliding in on a thermal updraft, wingtips fluttering, circling the cluster of tall timber before diving in to raid a nest. Several of the pines had died over the years and been felled, providing the McKenzie household with a fortuitous supply of firewood for the long cold winters, while opening up the view along the beach and out across the bay. One day a weather bomb would hit and drop one of the towering pines on a house and hurt someone, or worse. Only then would the council understand that trees like that had no place in a suburban environment, but by then it would be too late for anything other than recriminations and running for cover. Until then they were home to the tuis, and a hunting ground for marauding hawks.
Susan McKenzie sipped her whiskey, ice clinking in the crystal tumbler as she set it down on the deck beside her.
“Thank God that’s over,” she said.
“I thought it went quite well, considering. Could’ve been worse.”
“He doesn’t miss a thing, does he?”
“What?”
She pointed to the car in the driveway. “That’s the first thing he said. I see you’ve got a new car.”
“Aside from the fact it’s only a Toyota and it’s ten years old, it’s none of his business,” said Charles McKenzie. “We’ve still got some money of our own. We can do with it what we like.”
“That’s not what he thinks.”
“I don’t care what he thinks.” Charles McKenzie took a good pull of beer. “Not any more. Not after the way he went to the lawyers behind our backs. Not after what he said about you.”
“He’s still my brother.”
Don’t I know it. Charles McKenzie was looking out across the bay at the whitecaps, listening to the flax and the cabbage trees rustling in the wind. The sun was still high in the sky. It had been hot for weeks, but the weather had changed overnight and now there was a strong sou’wester blowing through. Normally the southerlies brought cooler temperatures, but this was a hot dry Sirocco wind up from the Canterbury plains that did nothing to take the edge off the day. If anything it made the day seem more claustrophobic. Sitting on the deck at the front of the cottage they were sheltered from the wind coming in from behind so you wouldn’t know it was blowing, but out in the bay, the way it cut the sea up into whitecaps, driving the whitecaps before it, you could see how strong it was. Charles McKenzie watched a yacht pitching into the wind, reefed mainsail a small triangle of white against the mast, making a run for home before night fell. Watching the yacht going hard into the wind reminded him of the old saying that if you had to ask whether it was time to reef the main, it was already past that time.
“They come up here, sit at our table, enjoy our hospitality, eat our food, drink our wine, and all the while he’s scheming to sue us.”
“I was dreading having them up,” Susan admitted. “Ever since we didn’t hear from them on Christmas Day. You would think they could’ve rung to wish us Merry Christmas, wouldn’t you? Then when they didn’t come on Boxing Day with Billie’s presents like they normally do, I knew something was wrong. Jessica was okay, I suppose.”
“No she wasn’t. She was a perfect bitch. She completely ignored me when they first arrived. Did you notice that? Patted Sunny then walked past me like I didn’t exist. And it’s nothing to do with her.”
“That’s not what she thinks. She organised the appointment with the lawyer.”
“Why aren’t I surprised?”
Charles McKenzie took another pull of beer.
“He’ll get his money. That’s all he’s worried about. That’s what I said to him. What are you worried about, Jonathan? I wanted to hear him say it, but he wouldn’t. He wouldn’t even look at me. It’s the same when we shake hands. He just looks down and away. He can’t even look me in the eye when we shake hands. What does that tell you?”
“You intimidate him. You know that.”
“Not intentionally.”
Charles McKenzie finished his beer and glanced at his wife’s empty glass.
“Another?”
“I shouldn’t really. It’s been a long day.”
Charles McKenzie waited.
“Alright then,“ she said holding out her glass. “I suppose one more’s not going to make any difference.”
“Not so you’d notice.”
He went inside. Billie was curled up on the sofa reading The Hunger Games.
“How’s the book going, Billie?”
“Good.”
“Would you like a cordial?”
“No thanks, Papa. I’m fine.”
“Good girl. Let me know if there’s anything you want.”
“I will.”
Charles McKenzie got another beer from the fridge, twisted off the top and took a pull. He put the beer on the bench top and got some ice from the freezer. The ice cracked and smoked in the tumbler when the Scotch hit. He filled the crystal tumbler with tank water from the tap and went back out onto the deck. He gave the Scotch to his wife then leaned against the veranda post watching the whitecaps and the yacht. The yacht was still making heavy going of the headwind. He drank some beer. The bottle was cold and comforting in his hand.
“How long have we been living here?” Susan asked.
“Ten years.”
“I never thought it would come to this.”
“It hasn’t. Not yet. That’s the point.”
“I thought the point was to make money. Not lose it.”
Charles took a deep breath, letting it out slowly. He drank some more beer.
“We haven’t lost anything yet. Remember? We’re just down. You don’t make a loss until you sell the shares and realise the loss. Until then you’re just underwater. It’s just a paper loss.”
“So you keep saying.”
“It’s true.”
“That doesn’t make it any more palatable. I wish we hadn’t done it. I don’t know what I was thinking. Who would have known a Power of Attorney could be such a dangerous thing?”
“That’s where the power comes into it.”
You know how it goes, he thought. Power corrupts. That’s what had happened to her. Dazzled by the power. Intoxicated by the opportunity. Now it had gone against her she was looking for anyone to blame but herself.
“You wouldn’t be saying that if the market hadn’t gone against us. If the market had done what we were expecting it to do, we’d be sitting here drinking champagne and congratulating ourselves on our foresight and investing prowess. Mine anyway. And your brother and sister-in-law would think we were heroes. The idea was to try and pay for your mother’s care and stop the erosion of her estate so there would be more for all of you when the time came.”
“Now there’s nothing left to erode. Isn’t that too funny?”
“That’s not my fault.”
“I didn’t say it was.”
Charles glanced at his wife then looked away. He’d been comfortable enough with the first tranche of stock they’d bought, even though the money wasn’t theirs to spend. A six month play, maybe a little longer, something to help alleviate the pressure on the costs of her mother’s dementia care. A short term investment, if you could call six months a short time. The profit would be locked in before anyone was any the wiser, an unexpected and generous Christmas bonus for all concerned. It wasn’t as if they were alone in buying the market. The chief executive was buying, and the chief operating officer. Not to mention the institutions and funds. The retail end, the man in the street, was all over it. Everyone was buying, everyone believed the story and saw the potential. Everyone except the short sellers who believed the potential would be a longer time coming than anyone realised, that at current levels the company was over-valued and thus, unknown to everyone but themselves, had begun a brutally systematic sell-down of borrowed stock, driving the price through the floor. Then, instead of cutting their losses and getting out when the market went against them, they had compounded the loss by putting more in, averaging down their original entry price on the theory that when the share price recovered, the gains would be even greater. That was the real mistake. The first hit was a sucker punch they could live with. But then they had gone and broken the three most important rules of investing - always protect your capital, never put more into any one stock than you can afford to lose, never forget the first two rules.
That and not using a stop-loss.
Charles McKenzie could still remember the conversation, albeit with the benefit of hindsight and a healthy dose of grim humour.
“I think we should take the loss and wait for the price to stabilise.”
“Are you mad?” Susan almost shrieked “And lose ten thousand dollars? No. I’m not doing that. I think we should buy more while the price is down.”
“I’m not so sure that’s a good idea..”
“Why not?”
“Lots of reasons. It’s not our money. Averaging down is a dangerous play. The price might continue to fall. Who knows where the bottom is? Never try to catch a falling knife. Not to mention the bigger picture with the global economy.”
“So I just write off ten thousand dollars?”
Which is exactly what Charles McKenzie wanted to do, but Susan wasn’t interested. Small as it was, the loss hurt more than the allure of the gains to be had. Another mistake. Keep the emotions out of it. Ten grand. Pocket change.
Charles McKenzie had done what he could to dissuade his wife, but Susan McKenzie liked to think she was her own woman. Worst of all, she had the Power of Attorney. Armed with such power she could do what she liked. And she had. Trouble was, risk-reward was a double-edged sword. Now, not only did they have a life-changing capital loss threatening to tear their lives apart, but Charles McKenzie also had an ineffective brother-in-law and his bitch of a wife to contend with. Thinking about it he felt strangely disconnected. Nothing really mattered. Everything passed. Good times and bad. Such was life. This too would pass, and one day they would look back on it and laugh. After all, it was only money.
“It’s not like we did it deliberately to annoy him. Who in their right mind invests in the market expecting to make a loss? I mean, for crissakes, let’s just drop a couple of hundred of your mother’s estate into the market and hope it drops eighty per cent. Who in their right mind would do that? Only the shorts want prices to fall and we weren’t going short. We were always long. That was always the strategy. Go long. Take the high road. He just doesn’t get it, that’s his problem.”
“He’s not like you. He doesn’t understand.”
“That doesn’t mean he shouldn’t try to understand.”
“It’s just such a lot of money. Where are we going to find a quarter of a million dollars?”
“It’s not that much.”
“It is. Near as damn it.”
“The market will come right. It’s just taking longer than we first thought. Nothing stays down forever. That’s life. Ups and downs. Swings and roundabouts. You know how it works. Clichés. You just have to hang on and go for the ride.”
“It’s just that it’s been down such a long time. I worry that it will never come back up.”
“It will.”
“What if it doesn’t?”
“It will.”
“How can you be so sure?”
I can’t, Charles thought. That’s how they got into this mess in the first place. He thought it was a sure thing, and he was wrong. Now he knew. You can’t be sure about anything. There is no certainty in life. And there is definitely no certainty in the markets. That’s one damn thing he knew for sure now. Better late than never. If he ever managed to extricate himself from this mess, that was one lesson he would never forget. Men plan, God laughs. Do your own research, take it from there. So long as the fundamentals remained the same it would come right in the end. In that respect nothing had changed. The fundamentals were still good. They were better than good. They were outstanding.
“Because nothing’s changed,” he said. “It’s still a hell of a good story. It’s not like David’s done anything wrong. He’s done everything right. It’s just a timing thing. Time and timing. That’s not something he can control. Especially when you’re dealing with big pharmaceutical companies. You dance to the beat of their drum. They’ll sign the deals when they’re good and ready to sign, and not before. Meanwhile the institutions are still buying like there’s no tomorrow, so they like the story. And it’s not like David hasn’t got any skin in the game. Or Richard. That’s the top two executives. The chief operating officer and the chief executive. Why would they still be buying if they didn’t know everything was going to work out in the long run?”
“It’s the long run I’m worried about. How long will it take? Going long is a fine strategy when you’ve got the luxury of time. But what happens when you run out of time and it’s gone against you, what then?”
“You’re dead.”
“I don’t want to be dead.”
“Who does? With any luck we won’t be. Not yet anyway.”
Unlike your mother, Charles thought.
“We’ve only got a month until probate is granted. Then we have to pay the money back. That’s what the lawyer said. I don’t care how you do it, increase your mortgage, sell the house, find a new source of funding, I don’t know, but you’re going to have to find two hundred and forty three thousand dollars in the next three months. Plus interest. If we don’t, they’re going to sue us. My own brother.”
“I know what Patricia said. I was there.” Charles McKenzie looked at his wife and grinned. “It was most inconsiderate of your mother to die like that. You would think she could have held on a little longer. Why couldn’t she have waited until Christmas like we planned?”
“That’s not funny.”
“I know. Poor taste. I apologise. But it’s not as if we did it with malice aforethought. On the contrary, it was done with the best of intentions. It wasn’t as if we were going to grab the cash and do a runner to Rio. That’s what I told Jonathan You know what he said? That was what he was worried about. I mean, for crissakes. Two hundred and forty grand? How long would that last? He really has no idea. A couple of million, maybe, but two hundred?”
Charles laughed, remembering the look on Jonathan’s face when he said this.
“That’s not funny,” Susan said again.
“He didn’t think so either.”
“Did you really say that to him?”
“I did. How could he think that about you, let alone say it? You’re his sister. I don’t care what he thinks about me, but you would never do anything to hurt him and he knows that. Yet there he is thinking the absolute worst about you, and then saying it. To me of all people. And why? Because he’s worried he won’t get his share. That’s all it is. Good old-fashioned greed. Fear and greed. The only two things that drive the market, and he’s in there up to his eyeballs with the rest of us, only he won’t admit it. Hypocritical comes to mind. It’d be funny if it wasn’t so pathetic. No guts, no glory. He proved that true on both counts.”
Susan sipped her whiskey and gazed out into the bay. The cottage was in an elevated position one back from cliff top with north facing views up the coast and out to the Hauraki Gulf. The water was so close you felt you could reach out and touch it. The real estate agents called it close sea views. To the left beyond the stand of pines was Red Beach with the surf club. The day before had been the Chapman Cup surf carnival, an annual event that brought together clubs from all over the country, and from Australia. The beach was a spectacle of colour and activity - surf skis and surf boats, shade tents, beach umbrellas, competitors and spectators alike. They watched it from the deck and could hear the judge on the public address, “Australian competitors out of the water please.”
Now it was back to normal, a classic coastal beach shimmering in the late afternoon sun with a few lucky families making the most of the Indian summer.
“We’re not going to have to sell the house are we?”
“I hope not. But if we have to, we have to. We rolled the dice and have to accept the outcome.”
“I wish we hadn’t done it. I feel sick. It seemed such a good idea at the time.”
“That’s hindsight for you. Never fails.”
“How much money do we have in the market?”
“Not enough to cover it.”
“How did that happen?”
“Buy at a dollar twenty sit back and watch it drop to thirty cents. Then sell.”
“How can you be so flippant?”
“I’m not being flippant. But there’s nothing I can do about it so I’m not going to worry about it. What will be, will be. Worry about what you can control. That’s all you can do. I can’t control this so I’m not going to worry about it.”
“I can’t believe you’re not worried. I’m sick with worry.”
So was Charles McKenzie but he wasn’t going to admit it. He lived his life by a certain set of rules. The most fundamental rule of all being that decisions had consequences and you had to take responsibility for you own decisions, come what may. He was thinking about the consequences hurtling down on them like a runaway train and Susan was still talking.
“It’s all I think about. I can hardly sleep at night and when I do I wake up five minutes later thinking about it and worrying. I hate it. I don’t want to be like this.”
Charles McKenzie said nothing. He wasn’t sleeping well either, but what could he do?
“What happens if we have to sell the house?”
“There’s enough equity to cover it. We pay him out and move on.”
“Then what?”
“Rent for a while. At least we’d still have some shares.”
“So everything we’ve worked for over the past ten years will be gone?” She snapped her fingers. “Just like that?”
“No, not like that. Without the equity in the house we’d be bankrupt. Then Jonathan would really have something to fret about. So would we. You have to look on the bright side. We’re lucky there is a bright side. Imagine if there wasn’t? Where would we be then?”
“Can’t you ring David?”
“No.”
“Why not?”
“And say what?”
“I don’t know. He’s your friend. Ask him if everything is still okay. Ask him when he’s going to sign a deal. Ask him when he’s going to do something to get the share price moving. He‘s the chief executive isn’t he? Tell him to pull his finger out.”
“It doesn’t work like that.”
Susan finished her whiskey.
“I don’t want to sell the house.”
Neither did Charles. It had taken two years to find a place like this in a quiet cul-de-sac with close sea views. When he first saw it he knew it was something special. Like the shares, a once in a lifetime opportunity. A perfect place for Billie to grow up near the beach and enjoy the type of childhood that had become increasingly inaccessible for most kids her age. Never in his wildest dreams had he imagined being able to afford a place like this. But the market had been down at the time and they got it for a song. It had doubled in price since then. He remembered thinking that if he never did anything right again, he had got this right. No matter what happened, so long as they had the house, Billie’s future was secure. Now they risked losing it all just because they wanted to make even more money.
“We’ve got a month. A lot can happen in a month. Cantor’s have got a seven fifty price target on it. That’s three hundred per cent from where we are now. That’s a lot of upside. If we get even half of that we’ll be in clover.”
“What happens if it doesn’t go up? What then?”
We’re f*ed, thought Charles McKenzie.
“It will,” he said.
Susan looked at him.
“That’s what you want, isn’t it? To keep the shares?”
“I’d prefer both. The house and the shares. But long term, the market will outperform property. All things being equal the shares are worth more than the house.”
“Only in dollar terms.”
“I don’t know how you put a price on that.”
“You can’t,” said Susan. “In the meantime we just have to ride it out and see what happens. Is that what you’re saying?”
“Pretty much. What else can we do? No point crying over spilt milk.”
“I’m sick of hearing your clichés.”
That’s because most clichés are the truth in disguise, thought Charles McKenzie. Unpleasant as it was, there was nothing you could do to alter the past. The only thing you could do was learn from your mistakes and move on. Hopefully make better decisions next time. If there was a next time. The only mistake was to not learn from your mistakes. He smiled on the inside. There were enough clichés in there to sink a battleship.
His wife was elsewhere, looking up into the pines trying to see what she could hear.
“You know in all the time we’ve been here, all the times we’ve sat out here on the deck enjoying the view, I’ve never heard the sound of those pinecones cracking up like that.”
“Neither have I.”
“Why is that?”
“Maybe it’s never been hot enough.”
“It’s hot enough now.”
“It sure as hell is.”
“We should go for a swim.”
“Maybe later when it’s not so hot. I don’t want Billie getting sunburned.”
Charles McKenzie looked up at the vast, hot, empty sky then down at his beer.
“Another one?”
“I think I’m ready for a wine now.”
He went into the kitchen, got another beer for himself and poured a glass of Marlborough sauvignon blanc for his wife. Billie was still reading The Hunger Games. She looked up at her father fixing the drinks in the kitchen.
“Can I have a cordial now, Papa?”
“Sure thing.”
He made her a Barkers orange and passionfruit cordial in a Stuart crystal high ball with ice and NZ Natural sparkling mineral water. Billie put the book down and followed him out onto the deck. Susan looked up from where she was lying on the lounger.
“Hello, sweetheart, how’s the book?”
“I’m nearly finished.”
“Is it a happy ending?”
“I don’t know. I haven‘t got there yet.”
Billie was looking out across the bay to the coastline and the islands beyond. In the lee of the cliffs, where it was sheltered from the wind, the water was a rich transparent green with the sun shining through it. Further out in the bay where the wind was blowing and the sea went from calm to rough, the water was a murky turquoise with the whitecaps dazzling in the sun. The sky was very high and seemed to go on forever. A shimmering blue haze hung over the water from the wind and the white heat of the sun. The haze hung over everything making the green of the islands in the distance look blue, and the line where the sea ended and the sky began indistinct. Over it all was the privileged feeling of being part of something truly magnificent.
“Why does everything look blue?” asked Billie.
“It’s smoke from the bushfires in Australia,” Charles McKenzie told her.
“They must be big fires.”
“They are. Lots of them, too.”
“We’re very lucky, aren’t we, Papa?”
Charles McKenzie looked at his daughter and smiled.
“I think so,” he said. “All things considered. After all, we could be living in Syria.”