Hey all,
Although the nonsense laid out in the latest news release has heightened fears of a frivolous legal battle, the details of EO's actions lead me to believe his action does not necessarily mean a scary end game. As much as it is humorous to think Eric Owens is lecturing Eric Sprott on financial risk, we should take a closer look at what is going on behind the scary headlines.
The Affected Directors have failed to act in the best interests of Alexandria and its shareholders and must be restrained from taking further actions which could damage Alexandria, until a special meeting of the shareholders is held in a timely manner to consider the replacement of the Board of Directors.
Alexandria announced in a press release on March 16, 2018 that a special meeting of shareholders will be held on July 24, 2018. This date, over four months from now, was not discussed by or set by the Board of Directors. The failure of the Board to choose the earliest possible date for the special meeting places Alexandria at further financial risk.
So, Eric Owens basically wants an earlier Special Meeting to vote on Board of Directors, which he will likely lose. In addition, this meeting will likely give the opportunity for counter-initiatives to replace Eric Owens on the BoD.
The concerns raised in the Application stem primarily from the Affected Directors inability to pursue a coherent strategic vision for Alexandria that it is in line with the reasonable expectations of its shareholders. The Affected Directors have instead been exhausting valuable company resources, while narrowly focusing on potential transactions which undervalue Alexandria without apparent regard for how to pay for their activities. The now entrenched Special Committee has legal counsel and a financial advisor, over and above those of the company, apparently expected to be paid for by shareholders.
In my last message, I thought Eric Owens was either being delusional or vindictive. I think a third option exists, desperate. He is in a peculiar situation with his unapproved financing, where he cannot move forward to fulfill the promises he made to investors, and he cannot reverse course without admitting the fault of his actions. This is likely why a measly four months is super important to him, bot not important to pretty much every other AZX shareholder. Mr. Palikrousis is possibly complicit in the scheme in drumming up new investors and in a similarly unenviable position. Thus, selling AZX exposes Eric Owens and other involved parties to civil or criminal liability, because he misled investors.
Management had worked diligently and successfully to secure a financing that would provide the capital needed to move Alexandria forward. However, Mr. Gundy and the Special Committee have refused to vote on the financing, despite the funds being available, raising questions about their ability to act in the best interests of Alexandria.
See! I was wondering why Eric Owens was so fixated on his stupid financing in these complaints. At first, I stupidly thought he was being serious and wanting to get this drill program going, but this seems more like a weak attempt to cover his shite. Unless the BoD approves his financing, or he can find a BoD to approve his financing, he is in a very bad place. Once again, this is why Eric Owens is so incessant on changing the makeup of the BoD. His only way out of this situation is to change the makeup of the BoD.
Their failure to adequately consider and vote on the financing that had been secured by management, and which management had been tasked with pursuing, at a time when the funds are needed by Alexandria;
To me, this statement alone looks bad on Eric Owens, and I am shocked he included it. He simply admits the BoD didn’t approve of his financing, which would make it seems like he is admitting that he misled investors without BoD approval. This is further backed up with the evidence of holding the money outside of AZX. If the BoD didn’t vote on the financing, then how could he start collecting money? I don’t see how a grey area can exist.
I suspect, without first-hand knowledge, the key element of this debate will center around this term tasked. Is he saying the BoD complicity instructed to raise $20 million and then renege? That scenario seems very unlikely. To me, it’s more likely he is saying management’s duties include financing, and that he had an implied consent to conduct this activity. Thus, he is claiming that he assumed an implied consent for a significant material change of the business, which seems particularly negligent in my opinion. Since the BoD claims to have repeatedly rejected his financing requests, then, based on the timing of events, it may also show Eric Owens had full knowledge that his actions were legally questionable. If the court agrees with Eric Owens, then it also believes boards are just rubber stamps to management.
Their failure to continue with the drill program previously approved by the Board of Directors, thereby stunting the growth and development of Alexandria's resources
So, this seemingly dumb complaint is actually important. He promised to investors that he would conduct this drilling program in exchange for their investments. After being terminated by the current BoD, Eric Owens cannot fulfill his promises to these investors. See what he is doing here though? He is claiming by acting against the BoD he is acting in the interests of shareholders. Owens oversaw unauthorized efforts to solicit investors in an alternative financing proposed by management without proper approval of the Board to do so. This proposed financing was considered and rejected by the Board, following receipt of advice from its financial and legal advisors and advice from the financial advisors to the Special Committee. from the Feb 22 New Release from the BOD
So, all of this really centers around the timing and evidence of the rejection of the financing activity. However, it's clear he knew at some point the BoD was not supporting his financing activity, and if the BoD allegations are to be believed, he continued without notifying these investors. I suspect this will likely look very bad for EO.
Their pursuit of a transaction, to the exclusion of other viable options, which undervalued Alexandria, favoured a certain group of shareholders and appears to be to the detriment of all other shareholders;
So, this is something that can be alleged, but not proved. He even uses the word “appears”, which seems incredibly specious from a legal standpoint. Selling AZX is really only detrimental to a minority of investors who engaged in this unauthorized financing activity. So, it’s patently ridiculous for EO to claim that we, as a group of investors, share these same concerns. We did not engage in legally questionable activity by making false promises.
Their improper restriction, investigation and termination of members of management as retribution for doing what was in the best interests of Alexandria and its shareholders;
This is an amazing statement. Read it several times and let it sink in. The BoD oversees what is in the best interests of Alexandria and its shareholders. If Eric Owens is acting against the BoD, then he is essentially acting against the best interests of the shareholders. How many examples do we need of the BoD replacing management for not acting in the interests of shareholders? What is the purpose of the BoD if not to restrain the actions of management? Isn’t the BoD supposed to be independent from management? Isn’t this the whole point?
Their misleading disclosures regarding the legitimate financing activities of management and other false and inflammatory statements regarding management; and
Once again, Eric Owens centers around the rightness of his actions on financing. However, how can it be legitimate financing activity if he acted against the BoD? Does Eric Owens really want a court to closely examine this, where all evidence seems to be collected by the BoD? Probably not, but he also doesn’t seem to have a choice without admitting improper behavior. The time ticks particularly loudly until the July meeting for Eric Owens
.
Although Eric Owens is not limiting his request to these items below, so far, only one of the following items being requested seems to be potentially detrimental to existing AZX shareholders.
An order appointing an independent chair for the special meeting of the shareholders;
I have no issue here.
An order requiring the special meeting of the shareholders to be held as soon as reasonably practicable;
I do not prefer this, but it would help clear some of the uncertainty. I cannot predict his future actions, but he is not currently trying to drag anything out. If anything, he feels the heat and the only possible way to resolve his problems is to change the makeup of the BoD quickly. It might be good he is burning his first legal action on these items, which could be used to potentially counter more vindictive claims in the future.
An order restraining the Affected Directors and Alexandria from entering into any material transactions without approval of the Court or Alexandria's shareholders; and
So, this is really the main problem statement. The market reads the potential for the courts to block a sale. We should get an initial answer on this sooner rather than later, and I don’t see how the court would want to get involved outside of ensuring the shareholders have a fair vote on the transaction. If shareholders approve of AZX’s BoD after this special meeting and the final sale, then what standing does EO have to delay anything? I do not have a legal background, so this is just me speculating...
A declaration that the Affected Directors have engaged in conduct that is oppressive and unfairly prejudicial to and unfairly disregards the interests of the applicants.
So, I don’t see how the applicants can claim this without admitting they are acting against the interest of shareholders overall. It seems like Eric Owens is arguing the BoD should be regarding the interests of management over the interests of shareholders. This is contrary to the purpose of the BoD, and this complaint should fall flat on its own. The BoD has no obligation to act in the interests of management, especially if it’s also deemed against the interest of shareholders.
Mr. Owens and Mr. Palikrousis are looking forward to having the Court determine these matters and ensuring that Alexandria is returned to its path to success.
This is really an odd sounding statement, but it’s more gobbledygook from Eric Owens in his lame attempts to portray these actions are somehow in the interests of all AZX shareholders.
My recommendation to the BoD is the following
Make a deal to hold an earlier meeting for the BoD elections, agree to an independent chair, and promise to agree to an eventual vote on a sale of the company in exchange for an agreement that the outcome on any vote by the shareholders of AZX is final and the results are binding. He must agree that he makes no further actions against AZX or AZX’s BoD if he fails this vote. After this vote goes against EO, he cannot claim his actions are in the interests of AZX shareholders anymore.
NP
Disclaimer: My writing does not constitute financial or legal advice. I am not a lawyer or a CFA, so do not take any of my statements as authoritative.
I do not make any guarantee or other promise as to any results that may be obtained from using my commentary. No one should make any investment decision without first consulting his or her own financial advisor and conducting his or her own research and due diligence. To the maximum extent permitted by law, I disclaim any and all liability in the event any information, commentary, analysis, opinions, advice and/or recommendations prove to be inaccurate, incomplete or unreliable, or result in any investment or other losses.