I'd recommend shareholders read the discussion of the Debenture Resolution on pages 18-21 of the April 13 circular. As I thought should happen, Mr. Royer will not be able to vote on it. From page 20:
"In accordance with the rules of the TSX, the Debenture Resolution requires approval of the majority of votes cast at the Meeting, in person or by proxy. Those rules also require, in this case, that the approval is given on a disinterested basis, meaning that any common shares held by, or over which control or direction is exercised by, any insider of the Company or associate or affiliate of the insider who also holds Debentures must be excluded from the vote. As a result, the 21,570,942 common shares over which Mr. Royer exercises control and direction, as well as the 967,740 common shares held by the family trust, will be excluded in tabulating the vote for TSX purposes on the Debenture Resolution."
So how should shareholders vote on this? This is a tough one because to cast a truly informed vote you will arguably need a fuller knowledge of the company's financial picture looking out over the rest of the year than is publicly available.
If you believe that the company is not in any sort of financial distress then you will surely want to vote against the Debenture Resolution because you would have to see it as the debentureholders giving a gift to themselves at the expense of current shareholders. As the table at the bottom of page 19 in the circular shows, the dilution from this could be substantial and it's also impossible to know how substantial in advance because it will depend on what the New Conversion Price will be. For example, if the New Conversion Price is $1.00 then the number of new common shares created by conversion of all the debentures would be 17,250,000. And if the New Conversion Price were even lower? As (and if) it goes lower, this will push up the number of new common shares created exponentially.
Now look at this from page 18 of the circular:
"If the Debenture Resolution is adopted at the Meeting, the New Conversion Price will be determined based the volume-weighted average trading price of the common shares on the TSX for the five consecutive trading days (excluding any days during the Company’s general blackout period under its Confidentiality and Insider Trading Policy) ending on the day before the effective date of the Amendment. The timing of the determination of the New Conversion Price is intended to allow sufficient time for review of our financial results for the first quarter of 2021, scheduled to be released on May 10, 2021. The terms of the Debentures will otherwise remain unchanged."
This should be seen as kind of scary for shareholders. While the circular doesn't seem entirely clear as to when exactly this 5-day period will be, it's clear that it will be AFTER the May 11 meeting. This next part is important.
The Q1 financial results will be released on May 10, which will be AFTER the votes have been cast. The key point here is that if the Debenture Resolution is already certain to be passed (by the votes that have already been cast) and then Q1 turns out to be ugly . . . well . . . look out below. This could send the stock into a significant death spiral situation. The basic idea is that the lower the stock would go (post-May 11), the lower the expected New Conversion Price would go, and the higher the EXPECTED number of new shares would be created following conversion of the debentures.
This could create a cascading of expectations where:
(1) a falling stock price
leads to
(2) expectations of a lower New Conversion Price
leads to
(3) expectations of more new shares to be created (growing exponentially as the expected New Conversion Price falls)
leads to
(4) the stock price falling even further in advance of (or during) the five days when the New Conversion Price will be determined.
You can see why this is called a death spiral. The process will tend to feed on itself.
Now, of course, if Q1 results are really good there will likely be no death spiral. There could even be a bit of a boost upward as investors anticipate an even smaller number of new shares created than they may have initially feared.
But the problem is that shareholders are being required to vote on this BEFORE they have any idea how Q1 results will look. It's a little like being asked to jump out of a plane without being allowed to know if your parachute will fully open. If it does fully open you could descend to a really nice place. But it might only half-open. Or worse.
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So are there any reasons why a shareholder might vote in favour of the Debenture Resolution? Well, getting those debentures converted would make the balance sheet look better.
But here's the problem. The more you believe the company is financially in a tight spot (and hence needs its balance sheet cleaned up at the cost of dilution) the more you should be fearful that Q1 results will be ugly--which will tend to make the New Conversion Price lower, which will in turn make the dilution even worse, etc.
I would vote against.
And if shareholders approve this thing and end up having half the common equity drop into the laps of the current debentureholders, well, it will have been their own doing.