What our retiring Director's sell really means (Hint: For us shareholders it means nothing. For Claudio himself, it means he's good at math)
So, Claudio has been sitting on a pile (185,000) of cheap ($0.57 - $1.00) options for a while. Because the options carry a five year expiry, there has been no need to start exercising any of them for several years (assuming he remained on the Board). Like any smart option holder, with no immediate reason to exercise these options because he maintained all of the upside for any potential increase in future value, but had no down-side risk to his own capital. With options and warrants, you often sit on them as long as you are allowed.
However, option-based incentive agreements generally have sunset clauses that start the clock ticking for the expiration of the option based upon certain trigger events, which generally includes resignation or termination from one's position. When a trigger event occurs, the window to exercise the options is a defined period that is often stipulated as 30, 90, or 180 days.
From the Information Circular:
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Ceasing to be a Director, Officer, Employee or Consultant
The Option Plan gives the Board discretion when issuing Options to determine whether Options may be exercised at all or for a limited period of time following an optionee ceasing to be an employee, officer, director or consultant for any reason other than death or permanent disability, provided however, that Options held by such optionees must expire within a reasonable period following the date of such cessation as required under TSX policies.
Basically, you get to play the waiting game while you remain with the company, but it's '$#!T or get off the pot' time once your service time ends.
So, back to our friend, Claudio and whether his recent actions may provide any indication to us shareholders wandering in the dark...
It appears that Claudio recently sold two blocks of shares in the range of $5. From page 6 of the 2017 Information Circular, Claudio controlled or directed 1,366,500 shares of VLE. A reasonable person would assume that it would make good sense to make sure that he cashed in on all of those cheap options that will soon expire. A reasonable person would probably also assume that our retiring Director might decide to sell a small fraction (less than 10%) of his 1,366,500 shares for $5 and replace those shares (he actually increased his share total) by exercising his options and buying 185,000 shares for around $0.70.
So, by selling a bunch of shares around $5 and buying a bunch at around 70 cents, our retiring Director prevented his 185,000 options from expiring, slightly increased his share count, and walked away with an extra ~ $400,000 in pre-tax cash. He must be good at math.
Does this impact my own investment thesis at all? Not one bit. Still long. Slightly bored, but excited for the long-term prospects of Valeura.