Unlocking Value - Proceeding with CautionHi folks,
I will start off by disclaiming that I am not a lawyer.
I am happy to see the Board take steps to unlock value at HWO. There is a "For Sale" sign written all over this. I would like to see value maximization.
My view; and hence the reason for my investment, is that the PNG business is worth something (Vs what the market seems to ascribe to it). This business unit could be worth another $1 to $3 per share depending on the advancement of LNG in PNG.
One of my main concerns is the privatization of the PNG business. My understanding is that shareholders of HWO are protected to a higher level as a publicly listed company in Canada. If the company were taken private or was to be acquired, there would be a fairness opinion. Also, there are governance requirements to treat shareholders fairly that private companies just don't have. How can shareholders have comfort that they will be treated fairly in owning a company that operates in a VERY foreign jurisdiction and in a very different legal environment. What would protect us from the company being essentially "stolen" out from under us post-privitization.
The other element that needs to be addressed is the liquidity discount. Right now you could sell your shares if you disagreed with Management. If the PNG business is privatized, there may not be a path to liquidity if you wanted to exit post privatization. This is especially important as I suspect that insiders will have a controlling interest and be entirely able to call the shots.
If you were to consider that the special dividend would be paid prior to the spin-off of the PNG assets, this would mean that at the time of the spin-off, the PNG asset could in fact be the largest asset of the company and that a Fairness Opinion could (or should) be required. While you could make the argument that all shareholders are receiving their pro-rata share in the newly formed spin-off company, the counter-argument is that it affects the valuation based on the prospective hypothetical valuation discount that would be applied due to a lack of liquidity as well as an increased discount to minority shareholders due to the reduced regulatory and governance requirements that a public company has.
I want to be clear that I am not opposed to spinning off the PNG business that the market is not ascribing much value to; however, I want to know for certain how I am going to be protected from a Governance standpoint going forward.
There needs to be WAY more information before any public shareholder could feel comfortable with this situation. What I do like is that Management is not liquidating the business at basement prices and is trying to find a way forward.
They must "cleanse" the publicly traded Canadian entity in order to sell it off for the historical tax losses.
Best of luck,
LR