In preparation for a vote on ELD low-ball offerLet's a ssume the worst scenario that there is no new offer from a third party (G, AEM or otherwise), and also our management is tied up in a straight jacket without an "escape clause" to get out of the deal and ELD SP is going down and down, in a death spiral, below $4 due to the Greece and Turkey "acts of god", such as war, government interferrence, famine, labour unrest, etc, then the deal will be put to a shareholder vote for acceptance or rejection.
It would need to pass two tests for acceptance:
- 2/3 (includes vote from insiders such as ELD and management)
- 50% plus 1 (excludes ELD and management)
Let's use the following numbers
- OS: 486M shares = 12.7%
- ELD: 62Ms = 2%
Total ELD + Management = 14.7%
- The rest: Other major shareholders and retail = 100 -14.7 = 85.3% (or 414Ms)
- shares sold/bought from 15 May (ELD Offer) to 23 May 2017: 175Ms = 36%OS has changed hands during a period of 1 week. New players (old player as well) have postioned themselves. It would be nice to have a list of major shareholders of ICG to have some "educated" speculation on the potential king-makers. If anyone has come across a recent list, please share.
One point worth mentioning here is the vote results would depend crutially on voter turn-out, specially the 2/3 (or ~66.7%) majority. This test allows votes from ELD and management which has indicate its would vote YES in support of ELD offer (shame). Three scenarios are listed below:
- 100% turn-out: Combined ELD + management = 14.7% (too low to pass 66.7% of total votes)
- 75% turn-out (364Ms) : ELD + management = 20%
- 50% turn-out (243Ms) : ELD + management = 29.7%
As shown above, ELD low-ball offer has better and better chance to get through as the vote turn-out getting lower and lower. A 29.7% is not enough to pass the 2/3 test, but there are more potential YES votes, e.g., 175Ms recently changed hands represent 36%, if they all vote YES.
Let's not forget our (retail) votes which could form a significant force that would block the 2/3 majority. Every votes count. Vote NO to reject the low-ball offer.
If management does not come clean to explain the situation to shareholders (why they did what they did, and that they really work very hard trying to get shareholders better deals) then don't hesitate to vote them out.
The simple majority (excluding ELD and management) is similarly affected by the vote turn-out. A 50% turn-out would give the 1 vote a power of 2 votes. Again, if you don't like the low-ball vote NO.
If the low-ball is rejected by either 2/3 or simple majority, the deal is off, and ICG is off the hook for the $18M penalty. Several potential options below:
- ELD comes back to sweeten the deal for another vote (Most likey it will come back with a better share exchange ratio to match the original claim that the offer was for $590M...but I personally don't like ELD shares, too much exposure to Greece and Turkey).
- ELD gives up, ICG goes back to the pre-offer state (that's is fine). The SP would drop, but will recover with good exploration results and progress toward production. But, ICG management would lose shareholder confidence and could face a revolt from shareholders.
- Other offers may come in from rivals. And this could be part of the revolt to unseat current management and the BoD.
GH
GH