Unprecedented...This new share issuance is stunning, 7 months after the last one. I’m now considering selling but may wait until the AGM in case someone with a moral compass shows up to take the lead. Aimia still could be a great investment vehicle, but what's happened here recently is indefensible, and I’m worried it will continue with the next affront likely to be a huge issuance of shares to whomever they choose to be CEO, probably another Jefferies / MassMutual lackey.
Issuing Aimia shares at $2.50 (vs. book value of $5.77), after telling us 2 days prior that the shares are so cheap that “we expect to launch a normal course issuer bid later this year,” is unfathomable. With ample cash on the balance sheet, it's economically nonsensical to issue stock so dilutively, and there is no alignment of interest achieved by issuing stock with a 6-month lock-up. If the liability Aimia is paying off is being valued at book value, then the consideration being paid (Aimia’s stock), should be valued at book value as well, and the stock should only vest over a long period of time, otherwise why not use cash?
Like the highly dilutive private placement issuance at $3.10 in Oct. 2023 that raised cash Aimia didn't need (while somehow tricking the Capital Markets Tribunal (CMT) into believing otherwise), this new dilutive issuance of shares is yet another act of unabashed entrenchment which enriches others at Aimia's expense. And it explains the ongoing delay in announcing the AGM; they had to get more shares into friendly hands first. (But why Mithaq hasn’t called a meeting first to pre-empt such tactics is baffling.)
It clearly does not "unlock shareholder value" as Executive Chair Tom Finke claims, because as a mathematical fact, it depletes it. What it does do is increase the roughly 11% stake held by the Jefferies / MassMutual private placement group into a 16% voting block when adding the 5% stake Paladin now owns. Add in the shares for which they’ve got voting support agreements from the Milkwood and Mittleman settlements which I’m guesstimating are around 5% of shares outstanding, and they’re likely now around 21% of the votes. But they need 27% to match Mithaq’s stake, again diluted now for the second time, which is why I’m worried that more dilutive share issuance is set to come.
And it also does something likely unprecedented, which is to allow a private equity firm (Paladin) to cash out of its carried interest before any return is achieved for their investors, which in this case is only Aimia, and barely one year after the investments were made. It's unheard of, and for good reason.
At the very least, those shares and the cash paid for the Tufropes carried interest should have been held back to only vest over time, or as the carried interest initially planned upon some crystallization event (Aimia might have to wait years for a liquidity event), especially given that one of the two investments, Tufropes, which was $238 mil. in equity outlay (48% of $496 mil. total equity invested for both companies initially) is currently clearly underwater.
This is Aimia paying Paladin up front for performance that has yet to be achieved and while half of the investment is performing poorly, and diluting Aimia shareholders in order to do so. It's madness.
Tom Finke has extensive experience with investment funds. He certainly knows that this simply is not done. I really wanted to give these new guys the benefit of the doubt, but that's gone now.
Aimia’s balance sheet as of 3/31/24 showed $546 mil. in shareholder equity (excluding non-controlling interests of $22.5 mil.). That's a book value of $5.77 per share.
Aimia issued 5,040,000 shares at recent price of $2.50 per share to pay the $12.6 mil. Bozzetto carried interest that Aimia bought back from Paladin. But even if those shares are only worth $5.00, that's a built-in windfall of an additional $12.6 mil. for Paladin, if only Paladin's deals are still worth around what Aimia paid for them (book value) and the stock price eventually reflects that.
Shareholder equity rises by $12.6 mil. to $558 mil., but divided now by 99,680,000 shares outstanding, means book value per share drops from $5.77 to $5.60, a drop of 3%, and the $0.17 per share loss of book value per share = $16 mil. in value on the pre-dilution share count of 94.6 mil. So that is the cost of this vote-buying, $16 mil. (Book value per share drops a little bit more on the overpay in cash for the Tufropes carried interest.) How is that “unlocking shareholder value” for anyone other than Paladin?
That is on top of the roughly 11% drop in book value per share that occurred when Aimia issued 10,475,000 shares at $3.10 during the October 2023 private placement that brought this new regime to power.
Altogether, the combined (Oct. 2023 + now) issuance of 15.515 mil. shares at blended price of $2.90 completely undoes all of the share buybacks Aimia has done since 2019, starting with the 14,705,863 shares bought back at $4.25 on the SIB in December 2019. Again, utter madness.
They implored us not to sell to Mithaq at $3.66, claiming it was inadequate and undervalued Aimia, only to issue new shares to themselves at $3.10 and at $2.50 to their friends at Paladin. Where are the regulators? Thanks to the members of the CMT and the OSC and the TSX for putting us in this position by allowing the private placement to stand. Instead of protecting us you've thrown us to the wolves.
From Aimia press release, Feb. 20, 2024 – "Aimia Inc. (TSX: AIM) (“Aimia” or the “Company”) today provided a response to the announcement made by Mithaq Capital that it has terminated its unsolicited tender offer. “We are pleased that shareholders rejected the activist tender bid offer, making it clear that it substantially undervalued the Company,” said Tom Finke Aimia’s Executive Chairman."
So, undervalued at $3.66, but not at $2.50? Explain that, Tom. Because $2.50 is 32% less than $3.66, and you've claimed $3.66 was substantially less than fair value.
From Aimia press release, Dec. 4, 2023: "The Special Committee and Board previously determined, and continue to believe, that the Hostile Offer undervalues Aimia and is not compelling for a number of reasons, including: · the small, below-average premium offered to shareholders relative to Aimia’s trading price at the time the Hostile Offer was announced, which is particularly unappealing given it was made during a period in which Aimia was trading near its lowest price in the last three years and the Canadian S&P/TSX Composite Index was trading at its lowest year-to-date levels; · the Hostile Offer price is significantly below equity research target prices for Aimia and fails to account for the Company’s promising growth opportunities; and · the written opinion of the financial advisor to the Special Committee and the Board that, as of the date of the opinion and based upon and subject to the assumptions, limitations and qualifications contained therein, the consideration offered to shareholders (other than Mithaq and its affiliates) under the Hostile Offer is inadequate, from a financial point of view, to such shareholders."
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Hopefully this new attempt at entrenchment will fail. A fiduciary cannot hurt shareholders to preserve their own power, and this relentless dilution is clearly hurting shareholders.
Meanwhile, where is Mithaq?