RE:GHOSTS OF FAILURES PASTThanks for sharing your colleagues insights. I’m going to throw down my own (albeit very un-insider) rebuttals based only on what I can infer from the board posts, filings, etc.
1) The assertion that Ryu has no link whatsoever to LRN is tough to swallow given that there seems to be no other credible alternative explanation for the concurrent connection to Cozumo.
2) The very fact that Ryu is now at the head of any company is validation that a board somewhere believes he can do good things. Speaks to his credibility.
3) Ryu could provide connections and business development through management, the board, or “lower level” managers.
4) I’m sure MacGregor is a decent manager, but running a private pharmaceutical enterprise is going to have different operating characteristics than would an ESL business. Pharma would involve highly trained people in a high margin business with high barriers to entry, and ESL is the complete opposite. Which I only say because his background is probably equi-distant to ESL as is real estate.
5) I don’t think all of the negativity towards Shant et al is entirely valid given that companies of this size have a certain amount of contractual inertia, and that pulling off a turn around like this is likely more than a 6-8 month exercise. There’s a good chance that the belt tightening they were supposedly implementing will bear fruit for the new management team in 2016.
6) It seems that the ante into this game is a $3M pref offering, and quite likely that management was brought on because they can raise this, while Shant supposedly couldn’t. But it still seems odd to me that BMO would stick it to Shant and be sweet on MacGregor, unless they really didn’t like Shant. So there’s another backhanded vote for MacGregor.
7) All this to say, I think I can get comfortable with this setup and narrative. It is a very, very odd situation and one that I struggle to make sense of. And if I’m wrong and if by some act of abject insanity this connection is completely coincidental and without substance everyone at LRN should give their heads a serious shake.
8) As an aside, the very fact that these announcements were staged like this with the first being to declare the breach on the 14th, and the last being to declare the agreement in principle to restructure on the 22nd would be tough to swallow for some. I saw that Cormark’s David McFadden discontinued coverage on the 15th, which is significant. The drop from say five cents down to half a cent actually represents a greater relative loss for common shareholders than did the drop from circa 32 cents down to circa 8 cents after the 2014 financials were released in June. Given the volume of shares traded during that time, you can bet that a pile of people made money and a pile of people lost money. As I previously posted the recovery wasn’t totally unexpected, but still…
9) As a final aside, I would very much like to understand the mechanics of how the board changes were done because.. as far as I’m aware any Canadian publicly traded company in Ontario requires a special resolution of 2/3 majority approval to add or change directors of the company (if not in CCAA). BMO could effectively force the resignations under threat of enforcing its security on LRN’s assets, but acceptance of those resignation and subsequent elections of new directors would likely still require the approval, I think. The only time this wouldn’t be the case is if the company were in CCAA and effectively controlled by a trustee. But since BMO has not yet enforced its security on LRN’s assets, and [a lot of other legal stuff] I think the statutory rights of common shareholders are in-tact and therefore the voting provisions above apply. Basically, tell me who voted for this new management team and why. Or why all of that is wrong and how a senior creditor can affect board level changes (I’m not expert in this).