Minority Investor Action Group MIAGTo all those who indicated support, we are in the process of setting up a secure platform to enable us to access and understand what MIAG is proposing and how your participation can help you and other shareholders.
You will be able to view information and gain a better understanding about what has and is happening and how we intend to challenge it.
A number of shareholders have already indicated that they will join and holding bad majority shareholders to account across these companies. Our focus is legal action similar to that already underway in LeadFX, and as foreshadowed in the article reprinted below.
Chuck Finley
LeadFX's going-private deal is an opportunity for regulators to get serious about shareholder rights
Minority shareholders cry foul as company issues equity to itself to climb above vote threshold
A recently announced going-private transaction by Perth, Australia-based LeadFX Inc. presents the perfect opportunity for any regulator worth its salt to show that it is serious about protecting the rights of minority shareholders.
On July 23, the TSX-listed company announced a plan of arrangement that would see Sentient Executive and InCoR Energy Materials Ltd. control 100 per cent of the outstanding shares.
What any regulator worth its salt would do is tell the company the proposed transaction is abusive to capital markets and needs to be reworked. It can point out that it has used its power in the past to knock back a similar transaction in the fall of 2016, involving Frontier Rare Earths.
“I am very upset that the company would take this action, without giving the minority shareholders a chance to vote on it,” said Michael Pearson, a long-time LeadFX shareholder, and a regular buyer in the market and who has offered to participate in any financing. “They ignored my request.”
Pearson is the company’s largest minority shareholder, with about 4.8 million shares, who has expressed his displeasure to the independent directors.
What irks critics is the process to bring the matter to a vote (the meeting is set for “no later than Oct. 15.”), which they say disenfranchises minority shareholders. In effect there is no vote, because the plan is to implement a share consolidation prior to that date. The only shareholders entitled to vote are those who have at least five million shares – a fairly healthy entry level.
“This supposedly is a public company and supposedly the minority shareholders have rights,” Pearson said. “The company has deliberately issued equity to themselves so that they could get above the threshold for not requiring a vote of the minority shareholders. It is outright oppression of the minority for the benefit of the two majority shareholders, and it stinks.”
After the consolidation has been completed, the only shareholders who will be voting are Sentient, an Australian private equity fund and long-time backer, and InCoR Energy Materials Ltd, a technology company that first invested in June 2017.
For the minority, who will watch the proceedings from the sideline, the reward is $1 a share, or a cash payment of $13.331 million. (At the end of last March the company had 66.753 million shares outstanding.) That payment will be made by InCoR.
A two-person special committee that retained a financial and legal adviser has determined the $1 price is fair from a financial point of view. It represents a premium to the recent trading price, but over the past six-and-a-half years the stock has averaged $5.14 and traded in the range $0.115 to $12.375.
Some shareholders are calling foul, arguing the price is low. About a week after it announced the going-private proposal, LeadFX announced the sale of its interests in mining claims in Utah, which is expected to generate US$4.5 million in proceeds. (It isn’t clear whether LeadFX will make a profit on the sale.) One day later, the company received the green light from the Western Australian Environmental Protection Authority for the Hydrometallurgical Facility and mine extension of the Paroo Station Lead Mine, its key asset.