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.If that is the case, they are likely more content with that arrangement than the dilution long term shareholders have suffered through lately.
Was the percentage based on allocation of a finite number of shares at that time? If so they are getting diluted like the rest of us longer term shareholders.
A small bio tech company called Tengion (TNGNQ) just went BK when shareholders refused to support further share dilution as they were seeking funding to get them through Phase II trials. A very promising use of stem cells and the company was even profiled on 60 minutes (go to YouTube "Growing Body Parts" if interested) yet the shareholders refused to play ball with mgmt and they closed their doors. Not sure what happened to the intellectual property (patents and models) but I suspect they are all being liquidated and sold to the highest bidder. Which means that all those patents they have will be scooped up by someone else so they can do something with them. Same sort of scenario is possible here just substitute the patent portfolio TNGNQ had for the blocks and acreage EHRE has. I hope that is not the case here but who knows? We will see how it plays out. I think they should have done an unbrokered private placement instead of using the loan sharks they did here with the Convertible Debentures.
U.S. Markets closed for Good Friday
Fri, Apr 3, 2015, 10:00 AM EDT
http://finance.yahoo.com/
This is the reason you won't see a valid bid or ask today, they are giving us time off to think about all sorts of other things than the markets inter day movements.
Thinking quite a bit lately about corporate governance issues in the context of some of the things going on here with ERHE. ISS is the outfit that holds themselves out as the global leaders on corporate governance, providing services aimed at enabling the financial community to manage governance risk for the benefit of shareholders. And in fact they are actually a service provider whose information is widely available to instituational and retail investors alike. You can even find their rankings on the Yahoo Finance page under the company profile section when looking at various company details.
I reviewed some of what they have for the big IOCs and even some of the smaller independents and find they all seem to consistenty rank fairly high in the categories they are rated in. For example:
Exxon Mobil Corporation’s ISS Governance QuickScore as of Apr 1, 2015 is 4.
The pillar scores are Audit: 1; Board: 6; Shareholder Rights: 2; Compensation: 7.
Chevron Corporation’s ISS Governance QuickScore as of Apr 1, 2015 is 1.
The pillar scores are Audit: 1; Board: 2; Shareholder Rights: 1; Compensation: 4.
ConocoPhillips’s ISS Governance QuickScore as of Apr 1, 2015 is 1.
The pillar scores are Audit: 2; Board: 2; Shareholder Rights: 6; Compensation: 7.
Marathon Oil Corporation’s ISS Governance QuickScore as of Apr 1, 2015 is 3.
The pillar scores are Audit: 2; Board: 4; Shareholder Rights: 4; Compensation: 4.
Devon Energy Corporation’s ISS Governance QuickScore as of Apr 1, 2015 is 6.
The pillar scores are Audit: 2; Board: 9; Shareholder Rights: 5; Compensation: 6.
Anadarko Petroleum Corporation’s ISS Governance QuickScore as of Apr 1, 2015 is 9.
The pillar scores are Audit: 2; Board: 1; Shareholder Rights: 6; Compensation: 10.
Energy XXI Ltd.’s ISS Governance QuickScore as of Apr 1, 2015 is 5.
The pillar scores are Audit: 2; Board: 4; Shareholder Rights: 4; Compensation: 8.
Continental Resources, Inc.’s ISS Governance QuickScore as of Apr 1, 2015 is 6.
The pillar scores are Audit: 1; Board: 9; Shareholder Rights: 7; Compensation: 5.
Oasis Petroleum Inc.’s ISS Governance QuickScore as of Apr 1, 2015 is 7.
The pillar scores are Audit: 2; Board: 7; Shareholder Rights: 7; Compensation: 6
Range Resources Corporation’s ISS Governance QuickScore as of Apr 1, 2015 is 5.
The pillar scores are Audit: 2; Board: 10; Shareholder Rights: 1; Compensation: 7.
Kosmos Energy Ltd.’s ISS Governance QuickScore as of Apr 1, 2015 is 7.
The pillar scores are Audit: 2; Board: 10; Shareholder Rights: 4; Compensation: 3
No big surprises with those. However, conspicuous by it absence when searching for information from ISS was anything coming up on the ERHE ticker symbol on the Yahoo Finance company profile page. I attributed that as being more than likely simply due to the micro cap size of the stock. Nevertheless, it prompted me to give a quick look at some of the factors that others (their industry peers) are rated on and several of the factors sort of jumped off the page at me based on a lot of the comments here over the past year or so and caused me to wonder how ERHE might rank compared to their larger industry peers - particularly in these areas:
ISS Quick Score is a comprehensive scoring based on multiple issues. Just to share this information with the board, I excerpted a number of select issues they examine relating to Corporate Governance:
318 - What is the dilution limit of the general mandate to issue shares?
321 - What is the aggregate dilution limit of share issuance and reissuance mandate?
128 - Is there a maximum level of dilution per year?
250 - What is the level of disclosure on CEO ownership guidelines
290 - - Does the company have a controlling shareholder?
78 - - Does the company have a poison pill (shareholder rights plan) in effect?
67 - Does the company have an ownership ceiling?
68 - Does the company have ownership ceilings for specific parties?
218 - Are there ownership factors that affect the takeover defenses?
345 - Has ISS' review found that the Board of Directors recently took action that materially reduces shareholder rights?
46 - Does the company disclose board/governance guidelines?
72 - Does the company have targeted stock placement that can be used as a takeover defense?
73 - Does the company maintain pre-emptive rights in the event of a takeover bid?
218 - Are there ownership factors that affect the takeover defenses?
78 - Does the company have a poison pill (shareholder rights plan) in effect?
145 - What proportion of the salary is subject to stock ownership requirements/guidelines for the CEO?
There were excerpts from an appendix listing factors they examine in various regions of the world when looking at various companies.
http://www.issgovernance.com/file/products/qs3-appendix-final.pdf
As this company navigates the current low oil price environment and gets out there and begins to drill and finds oil, there will undoubtedly be lots of growing pains as they wrestle with these sorts of corporate governance isues. I wonder if the current board of directors could do a self assessment and find themselves well aligned with the practices of the rest of their industry peers in many of these areas? At some point their historical approach for managing in each of these areas will have an impact on their ability to attract capital from the larger institutional buyers and they do look at these sorts of corporate governance issues.
I don't doubt him one bit when he says that. It's just a matter of perspective. In his case, it might just depend on where he lives in the world. I seem to recall that a Muslim man can have up to four wives.
I say "All the more power to them," I can barely afford the one I've got...??
So true. You guys are really funny today! ??
Or there is simply some level of inexperience or willful neglect, (or even incompetence - hope not) that would explain it. But even if that were the case it doesn't inspire great confidence in leadership. During challenging times most major companies rely heavily on their PR and investor relations staff to stay abreast of concerns and to have an effective plan for communicating with the investment community and media. I'm wondering if there is more to the DK issue than simply cost cutting.
I think you are saying that somewhat tongue in cheek - right? (I sure hope so anyway) I think the point you are trying to make is right on the money though.
Until people see some sort of definitive action to suggest something else is definitely going to happen, there is a tendency to extrapolate assumptions based on a continuation of the patterns that have been observed and that we are all so familiar with. And those things that are most recently etched in our memories are the ones most vividly and instantly recalled and at times forms the basis of those assumptiosn for future projections. And while those that offer predictions that differ from those assumptions may be thinking out of the box and applying sound logical reasoning, its just a fact that others may not have the benefit of additional thoughts, insights, education, or experiences that that some do, so at times the is a lot of healthy debate and even some disagreement and finally sharing of ideas over these things. Hopefully that is one of the benefits of being part of a good board. So don't give up on us yet!
They say in the stock market the trend is your friend. Folks have been riding this trend down for a long time and until things change they stay the same in the minds of many folks. But when it does - it could be very, very interesting.
I like your enthusiasm Doc - but in this case, suggesting "the insurance ALWAYS works" may be incorrect. When prices are driven down into the vast reaches of nothingness, what's to stop a majority shareholder from making a tender offer for the whole company at such a distressed price and making the BOD accept his lowball offer. In theory that is certainly a possibility in my mind and the little retail investors without sufficient clout (voting shares) would be stuck with whatever terms they dictate should there be a move to take the whole thing private. Under such circumstances wouldn't all of those who increased their shareholdings to average down find themselves selling at or near a loss? Yeah, I know - it depends on the terms that would be set for such a sale. But, I only recount this scenario as one possible outcome as it is not too far off from that situation I described earlier with Duluth Metals; investors kept buying on the way down to dollar cost average their respective positions and in the end while the stock sold for a small premium over the substantially depressed share price (it too was doing that familiar circling swirl in the toilet bowel at that time), it (the eventual sale price) was still considerably lower than market cap was earlier, leaving many investors very upset. So no - the dilution insurance does not always work out as intended.
I hear you when you said
"But there is now a chance ERHC won't be around that long."
And I suspect that one could have said that very same thing BEFORE they started with the convertible debentures as well. While I am not a real fan of the current means chosen for recapitalizing the company in this fashion, I think everyone would agree that it comes at a huge cost to current shareholders. But with that said, I would also venture to say that at least they are doing SOMETHING that might allow the company to hang in there long enough to make it to drilling.
Yes, there are a lot of hurdles to overcome between now and then and we have heard many of them articulated on this board already (and probably even more that we have not thought of or at least written about yet on this board). As I suggested in my original post responding to Doc, as we've seen in many other companies in this situation, IF they survive there is no guarantee that the shareholders get to participate in the ride back up (to break even or better) IF someone swoops in from the sidelines and buys the whole thing up lock stock and barrel. And the bummer for long term shareholders is that there would be no upside participation at that point. So yes there are a lot of risks here.
Doc - be careful what you wish for (ref: CEPSA interest)! I was in a small stake in a little company called Duluth Metals (DM.TO or DULMF) and they seemed to have the world by the tail too with a very prolific deposit up on the MN iron range. They had recently been tied in with a credible mining partner with sufficient capital to finance the project. Not long before they permanently stopped trading the South American partner gobbled them up. And to add insult to injury the long term shareholders were diluted out of most of their shareholder equity due to the issuance of convertible debentures. The long timers wished for nothing more than the opportunity to take the ride back up after taking a gut wrenching elevator ride straight to the basement. So long story short, not all these stories have a happy ending for the original investors. Of course this is why folks like you and Krom have been advocating the dollar cost averaging as some sort of dilution insurance.
Several things happen and many of the preparations are in the works already. You may have seen reports in the news indicating that US lawmakers have been working on changing the decades old rules prohibiting exporting crude oil from the US. This stems from the period back in the 70's when we had shortages. Here are a couple articles about it:
http://www.reuters.com/article/2014/12/31/us-usa-crude-exports-analysis-idUSKBN0K908M20141231
http://www.cfr.org/oil/case-allowing-us-crude-oil-exports/p31005
Watching a few other commodity stocks similarly start to flame out due to their exposure to convertible debentures (short term notes). Companies in a liquidity crunch might be inclined to borrow from these financers (some might call them loan sharks) short term and the way they seem to structure the notes if they don't pay back the cash with interest when due the notes become convertible to stock but usually at a healthy discount to current market price (usually spelled out in the agreement but have seen some will have 60% discount to share price). Unfortunately these never seem to be one shot and done events so the first time they dump all the shares on the market the SP drops and if there is a second tranche coming afterwards (say days or weeks later) then the diluted stock base and lower price impacts the price of the next batch to be converted. They call this crap death spiral financing for a reason. If the dopes running the company don't put a floor under the conversion price or insist on some reasonable staged conversion timetable (i.e. not immediate) these loan sharks (er.. I mean financers) can clean up and dilute the original shareholders into the dark reaches of nothingness in a heck of a hurry. And to my way of thinking if they are in cahoots with someone who is willing to work separately to short the heck out of the stock during a particular period of time that coincides with their convertible notes conversion, the damage to the orignal shareholders can be magnified immensely.
In my opinion convertible debentures in this manner are less preferable than a traditional secondary stock offering at least from the viewpoint of a shareholder who faces dilution of his ownership stake in the company per the original share structure.
To figure out how bad this has really been and how much worse it will get we (someone on this board) will need to go back to the 10Qs, scour it and dig up all we can on the disclosure of the convertibles and the schedule for their conversions.
Take a few moments to read this SEC filing.
http://archive.fast-edgar.com/20150218/A3A2L22CZC22NTZ222252ZZEVGVFCB223272
Pay special attention to the name of the reporting person on Magna Management LLC filing form. When I read it I paused and thought, “wait a second – I’ve seen and heard of this dude before in an earlier news piece on convertible debentures.” So I took some time to dig it up to share on this board.
Once you complete the Fast-Edgar SEC filing, take a few moments and check out this Bloomberg Business newsclip profiling a young man making millions in this market:
http://www.bloomberg.com/news/articles/2015-03-12/josh-sason-made-millions-from-penny-stock-financing
Anyone else connecting the dots and seeing the same things I am seeing? Same guy? What do you think of the timing of his filing indicating he has zero shares in the company? How do you think this squares up with the price decline in the stock? Hmmm…
I hate to answer a question with another question. But I will here - "Simple question: If ERHC has a funding runway to drilling without having to use additional toxic debt why hasn't it been announced?" More to the point, not just why hasn't it been announced, why pursue this particular strategy that involved the use of extremely dilutive convertible debentures rather than a different form of recapitalization? Why not a "follow-on" offering ( http://us.practicallaw.com/5-382-3479) or a "private placement" http://smallbusiness.chron.com/explain-differences-between-private-placement-public-offering-61989.html). I have a hard time imagining that either of those more traditional approaches for raising cash through additional shares would be anywhere near as dilutive as the quick cash (and resulting toxic death spiral) through the convertible debentures has proven to be to the existing shareholders.
"After the initial public offering (IPO) of a given company, an additional offering of stock for sale, which increases the number of shares outstanding in that public company.
But why do companies offer this additional stock?...
Simple really. They need more money. to reduce existing debt, or to fund expansion or acquisitions or, in some extreme cases, it's a last-ditch effort to save the company from failing.
If big money managers and analysts like the explanation given, for example for a business expansion or to fund further research and development in a high-growth area, then the stock price could actually go up on the news of a secondary offering." The reason it could go up is because the perception of the market reflects the fact that the company would then have the necessary funding to execute the business plan and there are good prospects going forward with the necessary capital through such an action. Of course the opposite can be true as well if the prospects are really bleak. (http://www.stockhomework101.com/275.htm)
And as a side note, I would observe that ERHC is not the only company going through some of this angst related to capitalization and tough times in the oil patch. See this link about Afren's problems (note mention of dismissal of CEO and COO in article): http://www.proactiveinvestors.co.uk/companies/news/78234/afren-agrees-rescue-deal-with-lenders-but-shareholders-face-major-dilution-78234.html?utm_source=Sign-Up.to&utm_medium=email&utm_campaign=7163-331334-Proactivity+-+13%2F03%2F2015
Or alternately check out this article. It profiles a company that recently failed to successfully partner with other firms through farm outs to assure adequate funding in NZ: http://www.proactiveinvestors.co.uk/companies/news/78225/kea-petroleum-surrenders-mercury-after-farm-out-process-fails-78225.html?utm_source=Sign-Up.to&utm_medium=email&utm_campaign=7163-331334-Proactivity+-+13%2F03%2F2015
You are right and between the two of them perhaps there is/could have been a way to avoid some of this current dilution with the recapitalization underway.
Your comments are on target here. "I would like to know if ERHE has the ability to pay back the debt after 180 days in cash instead of shares to protect their backside. Then Chrome could kick in valuable cash to repay the debt and stop the downward spiral sooner rather than letting this play out. This detail would be very helpful to the shareholders."
And this is one of the reasons I was questioning whether anyone had made ANY effort at recovery of the funds lost in that "Sir" Allen Stanford fraud a while back. Although that occurred several years ago, some of the articles in the news have said they have been making some recovery of funds. Even if a small portion of what ERHC lost was able to be recovered at this point in time it would go a heck of a long way to being able to pony up some amount of cash to repay the notes and perhaps reduce some of the painful dilution of existing shareholdsrs. Might seem like we are reaching for straws with this one but at this point the management team should be looking at any and all possible means for raising cash and the one that makes sense seems to be looking in those places where you would have a chance (even if it seems like slim chances of recovery) of getting something. I posted some of the links earlier to the site that victims needed to register with so they could get their part of the recovery; wondering if the management team even bothered to register and pursue recovery of the company's stolen money? Think this would be a good question to pose to DK?
I've been trying to determine whether the MOU was accompanied by a cash payment as any other option contract would be, but have not seen anything reported in this regard. If it was accompanied by a serious payment it could well be something to signal the intent of someone with a longer term interest (obviously near term oil prices are softer than before, will they go back up? Or drop down further from here? Not predicting here just saying if they go up, the option could prove to be a prudent move by an IOC. ) However, it also occurs to me that if the MOU was just a freebie (i.e., no cash payment) it could just as easily be nothing more than window dressing by mgmt in hopes of avoiding the SP debacle we are seeing with the convertibles now.
But I really do have to agree with you that given current market conditions if one of the major IOC were putting money on the line and had a serious interest in the prospect it could be a very good thing.
Your $90 number may be a bit misleading or oversimplified a bit. I only recall discussion of break evens in that neighborhood (and lower even) being tossed around for shale plays (non conventional) vs conventional plays as I understand we'd see with ERHC assets. Some of the deep water plays could approach this in some circumstances as well but again the on shore block we are closest to drilling is neither shale nor deep water. If the lifting costs turn out to be significantly less than these numbers it makes developing the asset all that much more attractive to produce.
What you just described is a change in conditions. Typically if such changes in operating or financial conditions result in different perceptions of the people that make up the market, their appetite for acquiring shares may change as well. The first question you asked alluded to what happens after the share price at 0.0001 is perceived as too high; it could reach the point where no one sees value and bidding simply stops. After a period of time the company could be delisted. So at about that point in time it becomes more a game that resembles something of a cross between both hot potato and musical chairs: when the music stops you don't necessarily want to find a chair because it doesn't do you a lot of good to keep playing, it resembles hot potato in the sense that if you are left holding the hot potato (sometimes referred to as the "bag holder") you may not recover your capital. In the hot potato analogy you could find that you can't really do anything with your investment in shares except perhaps take physical receipt of the share certificates from your broker and use them to wallpaper a wall or something. On the other hand, if the company's prospects change for the positive and people like its growth prospects going forward (e.g. drilling results in finding commercial quantities of oil/gas) they might just bid accordingly and you could see demand and price increase. And as owners of penny stocks can tell you there is often a lot of volatility in the shares of these tiny companies.
Right now we are seeing continual price declines that come with large volume of shares being sold indicating the sellers have control of the market as there is simply not sufficient demand from the buyers to absorb the shares in a way that would keep share price from sagging.
This is a somewhat unusual situation as the selling demand appears to mostly be coming from the holders of the convertible debentures that are converting to stock and selling the stock to recoup the money they loaned the company.
It could get to the point where there is "no bid." And at that point you hold shares of stock no one wishes to bid on to own.
Concur, Its sad but true. We really don't know which direction this will turn.
I understand your point and concerns here. But I am perhaps more concerned about watching this share price take the lonely walk down the path it is currently headed and then watch to see someone deftly step in and offer to buy the entire thing out, lock, stock and barrel, for a huge discount to what the share price and perceived market value was even as recently as last July, and that is not even thinking of speaking about what it was selling at in August 2009, or even as far back as July of 1989. This market has been really brutal to a number of small companies. For those riding this thing down, it is sort of expected that there should also be a right to ride it back up, but that doesn't always happen and sometimes the shareholder gets the shaft. In some instances this happens in both the very literal and figurative sense. For example, I was watching this little mining exploration company up on the Iron Range of Minnesota called Duluth Metals. Things really seemed to be going well there for that ambitious bunch of miners, they had completed a drilling program identified a huge deposit with considerable commodity value worth developing, developed mine plans and moved ahead on permitting. At about this point they had just snuggled up to get cozy with a Chilean miner named Antofagasta that had sufficiently deep pockets and appeared to be the perfect partner for them to move forward with on the project. Things were going well and it seemed like the future was very bright indeed, but then things got a little squirrely and Duluth shareholders found themselves on the outside looking in. The shareholders stood there watching in total amazement as their company got gobbled up by their new partner. What happened was that the shareholders got left at the altar in a manner of speaking - the share price got crushed and when the buy out was announced it certainly appeared as though the acquirer felt they were being more than generous to the Duluth Metals shareholders as the offer was ratified - after all it was for a higher price than where the current market had suddenly dropped to; but these were indeed suddenly ultra cheap shares... A lot of people had a lot of heartburn and empty wallets left in the wake of that incident after it all was said and done.
Here is a link to one of the announcements - note the mention of convertible debentures... http://www.twin-metals.com/antofagasta-investment-company-limited-completes-acquisition-of-duluth/
Here is what that stockchart looked like - see any similarities to ERHE? http://finance.yahoo.com/echarts?s=DM.TO+Interactive
Here is a link to a post with an article that recaps how that one played out: http://www.stockhouse.com/companies/bullboard/t.dm/duluth-metals-ltd?postid=23386236
Not a pretty picture is it? Easy to get burned in a market like this. Two very basic things drive the markets - fear and greed.
Humerous - yes, but that is not the way markets work.
If it is not something confirmed then I just got taken in too. The headline on Yahoo suggested more than just a prediction though, given the wording presented. Wonder if there is any way to verify/validate their prediction through other sources? Rather than sending an e-mail to DK at ERHC could it be a better use of time to ask the other company's IR rep to verify/confirm or at least comment? Seems like it would be important to know more about the basis for this.
Looks like your intuition was on the money! I just saw a message on Yahoo Finance message board that indicated there is a new venture for EHRC with China. I'm tied up at the moment but will try to post link later. In the meantime go to the EHRE message board on Yahoo Finance. Monday's open should be interesting.
He does not necessarliy have to resign to turn this around, but it is obvious there is a need for some pretty bold moves to get this headed in the right direction again.
Some might recall the story of Lee Iacocca who was famously known as "The Dollar-A-Year Man" http://www.forbes.com/2002/05/08/0508iacocca.html . He took the helm of Chrysler and for the sum of a dollar a year salary (he took his compensation in the form of longer dated options which aligned his interests with those of long term shareholders) he was able to turn that company around and led the organization through a very dramatic transformation. It also made him incredibly wealthy for his efforts.
Do I think PN is another Lee Iacocca? Hard to say, I don't know much about him other than he is a pretty decent writer, but you never know, he just might have the guts, fortitude and leadership ability to make the bold moves necessary to turn this around and pull it out of the ditch yet.
On the issue of CEO compensation and the approach of a dollar a year salary - here is what the Kellog School of Management has to say about it: http://insight.kellogg.northwestern.edu/article/will_work_for_stock_options/
The sucess ratio is often a function of the quality of the prospect itself (courtesy of mother nature) as well as the caliber of the geological and geophysical team they have working on the effort to assess and analyze the prospects and then develop the well drilling program. (Maybe its all well understood and should go without saying, but it is also very much dependent upon the quality of the information they have to work with so they make good decisions at each step in the process.)
I seem to recall that Tullow (also operating in the region) has a pretty decent success rate as well. One of my geologist friends went to work for them a few years back and given his track record at finding oil while he worked at Aramco on the Arabian Penninsula I got the impression they were happy to have him on board to help their team realize similar successes.
I certainly understand, appreciate and agree with your thinking about the wide range of odds for individual well success. There are a lot of variables at play that can influence outcomes.
More links on the Stanford recovery:
http://www.cnbc.com/id/101418516
On the eve of the fifth anniversary of the scandal, Dallas attorney Ralph Janvey, appointed by a federal judge to head the receivership and round up assets for the victims, said he feels the victims' pain.
"Even though my team and I have worked hard and made much progress over the last five years, the process of unwinding the fraud and the pace of recovering money have been frustratingly slow," Janvey wrote in an open letter to "all those affected by the Stanford fraud."
In the Stanford case, progress is relative.
Last April, Janvey won court approval to begin distributing $55 million to some investors. In the letter, he said $25 million has already been distributed, another $5.5 million could be paid this month and another $18 million in Stanford assets from Canada could be distributed this year as well.
But the rest of the investors' money was either spent by Stanford or is tied up in litigation. Janvey said some $200 million in assets is in Swiss banks and tied up in the criminal forfeiture process. He has sued dozens of people and institutions that allegedly profited from the Ponzi scheme, seeking more than $680 million. The prospects for recovering anything close to that amount, however, are unclear.
"Asset recovery litigation is difficult, lengthy and expensive," Janvey wrote. "The defendants, many of whom have significant resources, are defending the cases aggressively, and many of the favorable rulings in these cases have already been appealed."
Further complicating matters, victims allege: the Justice Department has not been as aggressive in the Stanford case as it has been in the Madoff case.
http://www.dallasnews.com/business/headlines/20130903-payouts-finally-begin-for-investors-swindled-in-r.-allen-stanford-s-7-billion-ponzi-scheme.ece
After four-and-a-half years, the receiver, Ralph Janvey, began mailing checks ranging from $2.81 to $110,000 to hundreds of investors. That amounts to about $55 million of the $6 billion lost in the scheme, less than a penny on the dollar.
Unlike the investors, Janvey, who has billed from $340 to $400 an hour for his services, is making out quite well. To date, Janvey and his team have recovered $234.9 million from the bankrupt Stanford Financial Group and spent more than half the total — approximately $124 million — on personnel and other expenses.
“From the victims’ point of view there is no way, shape or form that the receivership could be viewed as successful,” said Angela Kogutt, whose extended family lost a total of $4.9 million investing with Stanford. “This has been one of the biggest failures of a liquidation in history.”
While Janvey has begun distributing funds, liquidators in Antigua announced Tuesday they plan to make their initial distribution by late November or early December.
Marcus Wide, with the Stanford International Bank Joint Liquidators, said because of pending lawsuits and sales of property once owned by Stanford, he could not say how much money the liquidators have collected for investors or would be initially distributed.
Janvey and the Antiguan liquidators had been at odds as they fought over many of the same assets, but they agreed earlier this year to combine their efforts.
"The fact we are all working on the same team is definitely a plus and will maximize recoveries," Wide said.
http://www.publicintegrity.org/2013/10/10/13515/majority-funds-recovered-stanford-ponzi-scheme-spent-receiver
Janvey has been enmeshed in controversy regarding the Stanford liquidation. The Securities and Exchange Commission, which nominated Janvey and rarely has public disputes with receivers, won a motion to rein in some of his spending in June 2009 after the first fee applications were submitted.
The expenses included a $160,000 payment to a public relations firm called Pierpont Communications for three months of reviewing, sorting and forwarding emails in 2009. In a written objection to the fee application, court-appointed examiner, John Little, said he had “significant doubt that Pierpont has created any benefit for the Receivership Estate.”
FTI Consulting — a forensic accounting firm — billed more than $528,000 in airfare, parking, hotels, taxi, and subway costs to the estate for its first 56 days on the job. Little objected, pointing out that this amounted to “$9,439 in travel-related expenses per day, every day, during the first 56 days.”
A large part of the receivership’s early spending — $48 million — went to winding down the more than 100 companies in the Stanford Group, costs that were unavoidable, Sadler says.
Today, Little says Janvey’s spending has slowed. In the 12 months ended June 30, he’s spent $9.1 million, compared to $20 million spent in the first two months of the receivership in 2009.
Doc - It would be really interesting to see if he were to respond to any of these points. But somehow I don't really see it forthcoming.
Something else that has sort of faded from view is the lost investment in the R.Allen Stanford scandal. And getting an update on recovery would have been an interesting additional question for you to pose.
With the recent recoveries that were announced in the unrelated Madoff scandal I did a quick search to see if any progress has been made on the recovery efforts in the Stanford case. (I recall seeing earlier posts detailing the fact EHRC has lost such a big bundle along with the many other investors Stanford bilked). I see that nearly 5 years later, there seems to be some progress being made on the Stanford recovery, but they are only meager crumbs given the amount that was consumed by Stanford to support his opulent lifestyle. And the recovery as stymied by the outraguous professional fees that all the professionals engaged to assist in the recovery have billed. With that said though, there seem to be recoveries made. Against this backdrop I was sort of wondering if ERHC management has even pursued the process for legal recovery of the lost funds? Is anyone on this board aware of anything related to this issue? I have not seen or heard a word about this anywhere. Given the current situation, this could be important.
Recovery of even a small amount on the funds lost at this particular point in time would certainly be a better proposition (by using the funds to pay off the noteholders to the extent that would be possible) than subjecting long term shareholdes to the immense financial pain inflicted in the midst of the convertible note conversions. I noted that there is a website established that provides a lot of links and details to subit claim forms to be formally included in the receivership. This would seem to be one of the more reasonable and prudent measures that a responsible management team would take once they learned of the scandal so they protected the interests of the owners of the company.
Here is the link: http://www.stanfordfinancialreceivership.com/
I totally agree to the point you raised about wanting to see the 10Q. We won't know until we see that whether we have more dilution ahead. And until that is done we won't likely see an end to the lower lows. Buying in such an environment is like trying to catch the proverbial "falling knife" it is very difficult to determine where one should pull the trigger and step in to buy even if just for the sake of doing some dollar cost averaging to an existing position. One is often reluctant to get all bloody in catching the edge of that darned knife as it continues its fall lower and lower. Whether we are talking about capitulation in the oil/gas junior market or individual companies in that sector, I don't think we have reached the point of capitulation in either just yet.
Here are some excerpts from an interview with Rick Rule you may find interesting:
When I asked for his expectation of a final capitulation sell-off in resource markets, Rick noted that, “We came close last October. There were some moments of absolute panic…but we didn’t follow through with a capitulation… Capitulation usually follows a protracted period of diminished volume… [and] I have never seen a bear market in the juniors end without [one].”
“[But] just because I haven’t seen it doesn’t mean it has to be that way,” he further added.
Opportunities found at the extreme lows of capitulation, “[Are[ truly stupendous,” Rick explained. “I remember in the summer of 2000 that some stocks declined from $4.00 to $.40 cents, and were going ‘no bid’—changing hands at $.07 or $.08 cents...That’s what happens at the end of a capitulation, because every last available seller is gone.”
Commenting on tightening resource capital market availability, Rick said, “The cost of capital for commodity producers is high and is going higher… [credit markets are] more constrained than at any time in my career [with exception of the early 80s]… [and] I think you’re going to see – and I’m putting it mildly – a very interesting market in oil and gas-related junk debt for the first six months of 2015.”
TD: Rick, I think it was on October 16th of last year that you issued a specific capitulation commentary. In the following week or two the market just tanked.
A lot of the stocks we follow closely were down 30% to 50% during that period. I thought to myself at the time, “There it is. This is what Rick was talking about.” Then it turned out that a more severe capitulation did not happen.
So for the person reading, can you define ‘capitulation’ based on those few times you’ve seen it in your career? What were people doing and what did you see happening in the market?
RR: Capitulation usually follows a protracted period of diminished volume. The buyers are exhausted and the sellers are exhausted. The stock charts look like the electrocardiogram of a corpse, and that’s followed by some event or series of events that renews ‘enthusiasm,’ if that’s the right word, for the sellers in the absence of buyers.
I remember in the summer of 2000, that some stocks declined from $4.00 to $.40 cents, and were going ‘no bid’—changing hands at $.07 or $.08 cents. The period of time when that occurs is usually very brief, two or three weeks before a couple of people wrap their heads around the fact that for $.08 cents, you can probably buy something that’s worth $.90 cents, and will go to $3.00 in a bull market.
That’s what happens at the end of a capitulation, because every last available seller is gone. Capitulation is truly a wonderful thing. The second thing that happens in capitulation, and this is actually a better thing—is that the issuer community and the financial services community, the so-called ‘smart money’ (by the way it’s not the smart money) – capitulates too.
I remember in the summer of 2000 getting calls from the absolute A-leaguers in the issuer community; Robert Friedland, Adolf Lundin, Lukas Lundin, Ross Beaty, Bob Quartermain, all of these guys were saying, “Listen, there’s nothing to wait for. We have to raise money in this market. Tell us what it will take. Even if we have to dilute our company by 25%, the investments that we make right now will return 400% or 500% in the next five years. We understand that we can’t save our way to prosperity. We can only save our way to solvency.”
That concept is important because you can’t excite a market with the prospect that a company is going to survive. You excite a market with the prospect that a company is going to make a discovery or put something into production. You have to move forward and this is a capital-intensive business, so if you don’t have any capital, you don’t have a business.
The whole idea is that issuers capitulate too and say, “Damn it, let’s get back to work.” That’s what turns the market around, and we haven’t seen that yet.
An investor can only survive cyclical markets (let alone thrive in them), if that investor is a contrarian. You have to buy low and you have to sell high. A market bottom is not a time for selling. It is a time for buying.
(note - some of the points he raises about markets can also hold true for individual companies if the company has the means to keep the lights on and survive the downturn...)
It’s difficult to buy when all of the recent experiences you’ve had have been negative. It doesn’t make you an aggressive person. It makes you a cautious person. But this is precisely the time when you have to discipline yourself to buy the best of the best, and buy it in the context of the fact that you’re not going to be rewarded in April. You’re not going to be rewarded in May. You may not be rewarded in 2015. You might be rewarded in 2017. But the nature of the rewards you might enjoy are, in my opinion, predictable and large, and those are both good things.
http://sprottglobal.com/our-team/tekoa-dasilva/
Maybe, excerpt perhaps for the fact there was no huge run up to nearly 80 bucks per share first before falling off the edge of the cliff as MCP did! Seem more like this stock (FLPC) just got flushed down the toilet without any sort of real run up. Now with that said, I bet a lot of FLPC holders would welcome your prognosis if it were to involve a quick run up to about 80 bucks/share before coming back down to earth - that would certainly give a lot of folks a chance to recoup their losses before things fell apart [again]. Oh well, always nice to dream...
Odds of winning the Powerball are extremely remote.... good luck with that. On the other hand, if you were to win and then buy us all out, be sure to give us a fair price so we can share in your glory of outsized gains!
I can see where you are coming from on this line of thinking, and it makes sense if there was a desire to get some sort of share price pop from the announcement to offset the drop in share price that seems to have occurred with the conversion of notes. I guess it could also be all in the timing of events and how its all communicated. Someone else recently observed some of the same thoughts about how multiple things seem to be occurring at once after a period of not much news.
I tend to agree with your thinking about the validity of an agreement but I would disagree with the notion that there was no consideration given for what is effectively an option on what has the potential to be very lucrative to the IOC. Just because there is no mention of money doesn't mean there was nothing put forth. To my way of thinking mgmt did not wish to disclose it and perhaps did not consider it a 'material' amount subject to disclosure. We shall see in due course.
Thanks for update. What we may not be aware of in this was the issue of consideration with respect to the recently announced MOU with the IOC. If that agreement involved payment consideration for that option it would also be added to those amounts you cited.
'I predict the stock won't go below 0.' - LOL! Have a great weekend. :)
Exxon is a huge company and perhaps the distinction here is that while it may be PwC serves as the independent auditor, Deloitte could certainly serve in other capacities. And it very well could be in the manner you infer... Who knows? Time will tell.
All good points and I agree that this is indeed a fairly established part of the business cycle in the oil business for many decades. However, with that said, what OPEC has essentially just done is something completely out of character for business as usual for the past 50 years or so - they are no longer content to be the swing producer for the sake of protecting a certain price point and instead are now protecting their respective levels of output by shifting to a strategy of competitive pricing. To me this suggests a heck of a lot of pressure being exerted on unconventional (shale) producers. ERHE is a conventional play and if/when a proven reserve is established we could be sitting in a much better position going forward. The point here being that, past may not be prologue (or at least completely), in the same way it was in past cycles.