We could do this or that ... You know all of those things that could be achieved that could be part of a process of developing and growing a business. Right now, this is the kind of subject I'm reflecting on. So take these few lines as the result of a reflection.
So far, several scenarios have been mentioned but there is one in particular that catches my attention. This is the repurchase of shares for delisting. While such a scenario does not grow the business, it does have the merit of increasing the potential economic benefits for each share outstanding. The repurchase of shares is therefore the remedy against the several million options exercised in recent months and which gradually dilute earnings per share.
In the case of Robex, it should be understood that the situation is special because the management team is in full control, with 67% of the shares issued. This situation means that extra precautions must be taken to ensure that such a buyout is carried out with the objective that all investors, participants or not, are satisfied. On the one hand you have the investors who want to get the best price for their stocks and on the other hand there are those who want to make the best use of cash.
Given this absolute majority, it is important that a number of rules be followed for such a transaction to be successful. In this context, ethics is certainly the most important rule to respect. Considering all the positive consequences that could benefit a small group of investors, it is necessary to ensure that nothing detrimental can be observed by the minority shareholders participating in this buyout. For such a transaction to be compliant, investors must therefore have all the information necessary to make a wise choice.
For a company like Robex, which is growing rapidly and where many high-potential events can arise, it can be difficult to find the right time and the necessary time to complete a share buyback without the risk of being blamed for deliberately withholding information. On the one hand, Robex must ensure that the information is published consistently and regularly and on the other, there are rules that ensure that the information published is concrete and objective. To obtain the right combination of ethics and respect for the rules, it is necessary that a good reflection be done beforehand.
Imagine for example the situation where Robex wanted to buy back shares with a 25% premium on the current price. Many of us would possibly be happy to participate in this buyout to ensure the sale of a large batch of shares that the market would not be able to accept. So far so good. Now imagine the situation where Robex was to tell us 2 months later that an important discovery resulted in a doubling of the quantity of mineral resources, followed by a considerable increase in the share price. Is it possible that this situation could cause some investors who participated in the buyout to feel aggrieved? In my opinion, this kind of situation requires impeccable ethical behavior on the part of the management team. Otherwise, the financial markets authority might want to interfere, and I am sure that is not desirable for anyone. Consequently, the absolute majority of the shareholding by the management team makes it ill-advised to attempt to seize the best opportunity by adopting reprehensible ethical behavior. The best approach, in my opinion, is as transparent as possible.
Second, you have to understand that a share buyback is above all an investment in your own company. And like any investment, it must be in the best interests of all shareholders. Consequently, management must consider that based on the current situation of the company and its outlook, the value of Robex is truly undervalued. Do you think this is really the case? For my part, I am absolutely convinced of that.
An example of a bad target for a share buyback would be to intend to increase the value of the share price so that executives can earn a performance bonus on the value of the share. As far as we are concerned, we do not risk finding ourselves in this situation as no such bonus has been determined in the past by the Board of Directors. In addition, I am convinced that the management team in place has no intention of breaking the bond of trust that unites us by using this kind of stratagem to enrich themselves further.
An objective of increasing the value of the price could also be justified by a measure intended to protect the company from a hostile takeover bid, which is not a risk for Robex since the absolute majority of the voting rights are held. by the management team. This type of offer would therefore have no way out, if deemed unsatisfactory.
Finally, beyond the reasonable grounds to justify a share buyback, I consider that this type of transaction should not be done at the expense of a dividend but rather in parallel. Retention of the dividend must remain a priority, the second priority being the use of the excess for a share buyback and lastly, investing in the growth of production capacity. Make no mistake about it because if the level of mineral reserves allows it, I consider the increase in production capacity to be a very good direction. On the other hand, I consider that it is better to finance this type of project by debt rather than by using cash.
In conclusion and according to the information documents published by Robex, I am not in a position to estimate the most opportune moment to carry out a share buyback transaction, any more than I am able to estimate a price of adequate redemption for all parties. However, I consider the tremendous financial results, as well as the drilling results, the outlook for gold price appreciation, the exercise of call options in recent months, the low value of the share price and finally, the growing probability that an increase in production capacity will be announced soon are all arguments which justify that this share buyback should be the subject of careful consideration, without delay.
Have a good week