Hyduke Energy Services Inc. HYKCF

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I  did   not   realize that   I  had an  open  order to buy  200   k shares  that had not been cancelled while the stock was in the  70s. Hence   I  was filled in for average price of 58 cents.

 

   This   is  a case that  may  be taught in management schools for years to   come.   Do _  All    has to   have the most idiotic management  ever.    Now   I am reading in between the lines of  the last letter  and these are my hypotheses.

 First of all  Do -All  terminated   the  take over offer.  The negotiations had  gone on far too   long past the due date.  Maybe  HYD  had a bad Q3 and would  have lost maybe 5 cents a share. Whoopie do. That is not material enough  in my  view to cancel an offer  especially if u   havea grand design  for the   newly merged company. This suggests to me that   Do_All  ,  as a private company,  probably  was using the "take over offer"  to  glean   information from  Hyduke that  may  have gone well  beyond what would be normal disclosure.    Some of these items could be as follows    :  engineering plans for   the mega rigs   Hyduke had  concluded  the last few years  . Some of these  designs could have  several million in engineering and  job shop drawings and detailed work  flow   programs.  Other areas of contention could have been    for  HYD to fork over alot of proprietary information regarding their  newly  minted  Houston operation.  Houston is  a huge port and     Hyduke's gateway to    Mexico, Central and  South America. These are  valuable investments crucial to the company's future  and  ongoing success.   Many large  Canadian drillers have  virtually    no international   sales.   A third   area of contention could have been  access to  valuable contacts  in   Russia  developed  over the last few years.  There are   things  in the data room  you can look at,  others you cannot.  I   think  the all  cash offer was a smokescreen now  in  retrospect. This  in my  view was  designed to appear that  the   deal  was   "  a sure  shot"  and above reproach. I  think  later  as discussions progressed  this private entity  ( which answers to no one)   tried to get  all the trade  secrets  feeling entitled to them   as a condition for their all cash  offer. In this case  I  think    Hyduke's management    did the right thing. Perhaps  they even    figured out it was a ruse or   financing conditions were challenged.  The  key  point was that  Do  All  said    Hyduke management  was  not giving access  to all the information. I    think that  Do  All   went  public with this now  figuring there were enough disgruntled   investors   out there that  would now accept the   83  cent stink  bid.   This  reduction of   50  % off the offer price is   ridiculous and the  willingness  and nerve of Do All  to go ahead with this  shows to me clear that   they has no intention of concluding the  1.37  deal in  good faith.

I   think  several scenarios may unfold  here. Do  _  All might pony up  with a higher bid    of 1.10  to essentially "  split the difference"  or   I  think theres a possibility   of an offer much higher than  1.37  that may be forthcoming  by a player who can close  with alot of financial  muscle.   I  think  one of those two scenarios will unfold and rather quickly. To me this is a no  brainer.  This should gap  up  to 1.10  or  even go much higher  with a genuine  brand new bidder.  This time Rutherford may call his rolodex of contacts    looking for a white knight. It  may be NABORS  , which swallowed up one of his former startups, or   it may  be Mccoy   ( Hyduke CEO  sat on their board )  and both  based in Edmonton which could lead to a ton  of synergies.  After  contemplating all of these possibilities  I  added 400 k   more shares to my position today.   I  think  an offer will  come higher than  1.37  but at a minimum we will see an initial offer of 1.10   very  soon.