Fool:
Bottom line: I honestly haven’t yet made up my mind how I’m going to vote my shares.
I must confess I was taken aback by General Dalby’s e-mail to the shareholders yesterday afternoon. Let’s just say I -- and the documentation -- don’t agree with that perspective. (The company wasn’t exactly encouraging me to vote in its favor, was it?) Because of my high admiration for General Dalby, I frankly have a difficult time believing that he actually wrote it.
These are my last comments on the April transaction until AFTER the proxy vote, at which time I intend to speak -- conclusively -- about the failed transaction and the misleading “eight figure” nature of the deal. What happened then is not currently relevant in terms of who was right and who was wrong, or who was looking out for the shareholders’ best interests. It IS important and relevant in light of the upcoming proxy vote, and management’s request that you entrust them with an increase in the authorized shares of 400 percent.
Anyway, let’s move on to the matter at hand.
I candidly don’t believe it matters whether I vote “for” or “against” the proposal. As I said from the very beginning, regardless of the merits, I predict that this vote is doomed, for a variety of reasons. Hopefully I'm wrong, as I discuss below.
First, I have heard over and over again from shareholders that various members of the management team have neglected to return their phone calls, e-mails, or other items of correspondence. From my perspective, that clearly does not tend to create the type of goodwill toward management necessary to muster the necessary shareholder support for such a difficult voter turnout.
Second, the logistical challenge facing this management team -- any management team -- in reaching a two-thirds affirmative vote of ALL the shareholders is daunting.
Surely, those of you who follow the company on I-Hub must surely recognize that you are very atypical of the “average” shareholder. You care, you follow the company, you watch the share price. As I mentioned before, as of last January (remember that approximately 25 percent of the company’s shares have been issued since April), the company’s holdings were very widely and diversely held. As of January, the mean average shareholder held approximately 13,000 shares, and there were approximately 2800 shareholders. The vast, vast majority of the shareholders at that time held 5000 shares or less. The median average shareholder held only 2500 shares.
Further, many of them don’t have computers, they do not receive the CEO’s periodic e-mails, don’t follow the company’s news or share price, and quite frankly don’t give the company a lot of thought. There is a huge tendency among these “average” shareholders to either simply not care, or to not vote, wrongly assuming that their vote is irrelevant and that management has the votes to assure the item’s passage. As we know, that is not the case.
Next, I know from my own experience how difficult it is to muster a two-thirds vote. Back in 2001, when we were seeking approval of the GAMZ shareholders to the Ferris transaction (and other matters, including a doubling of the authorized shares from 50 million to 100 million), we were only able to achieve a favorable vote in the low 70 percentile. With many, many more shareholders (including the old Ferris leaseholders), the company’s disappointments, and with the company’s apparent indifference to the shareholders over the summer, without even considering the opposition to the proposition, it is only logical that management’s task is objectively more arduous than it was in 2001.
Thus, again, I don’t think my vote matters one way or the other. This is unfortunate for the company and for all of us, as this issue deserves to be determined “up or down,” and not merely because the company is unable to receive sufficient votes for a determination.
As to my personal decision, I remain conflicted, it is obvious that many of you remain conflicted as well.
Again, I have a very high regard to General Dalby, and in many ways for VTSI he is akin to Obi-Wan Kenobi: “He is our only hope.”
We need General Dalby at this crucial point in time. I think he is astute enough that over time he will develop his own conclusions about the people surrounding him, and garner a bit different perspective as to the history of the company. The last thing we need is for General Dalby to get discouraged and throw in the towel. If, as I predict, this proposition fails, I sincerely hope he recognizes that the objective logistics of the process doomed this proposition from the start.
Like so many of you, I’m conflicted over the request for 400 million additional shares. From my observation, the clear consensus of the callers in the shareholder conference call was that they would have been much more receptive to a smaller request, and that is a refrain we have all seen repeatedly on the I-Hub posts. I want to give General Dalby the tools he needs, but such a large increase is very difficult to swallow. I simply have a very hard time believing that so many shares are necessary.
I think all of us recognize that some capital restructuring is necessary at this point in time. I had hoped to accomplish this through the Altatron/Dynalyst merger and a “recapitalization” of the company (new company = new shares, reduced number = new share price). However, for whatever reason, the merger did not take place, and I think we are all uncertain as to its current status. However, it’s clear the company needs to do something towards a capital restructuring -- I’m just not sure this “something” is the right option.
I’m conflicted as I review the recent flurry of announced sales activity from the company. Unfortunately, all of them (other than the recent “alliance” with the former IES representatives) were already in the pipeline in April. It is only logical that the sales activity should have picked up in the last six months as more and more of our simulators made their way into field training and into the marketplace. I have every reason to believe that our sales staff has been making significant headway, but where are those deals?
When the GAMZ/Ferris merger proxy was underway, we “worked” our shareholder list aggressively, seeking out shareholders and requesting them to vote. No one from the company has called me urging me to vote, nor have any of the large shareholders with whom I stay in contact received any contact from the company.
How will I vote? Right now, I honestly don’t know. Under normal circumstances, I’d clearly vote “no,” and express my displeasure at management seeking such a large increase. However, the dire circumstances the company finds itself in, as outlined by General Dalby, pushes me toward the affirmative, although I share the view of many of you that those items could have been addressed with a smaller request.
Heck, I may even physically go to the meeting and decide on the spot.
I have millions of reasons why I truly want this company to be successful. I have heard from those of you urging me to vote “for,” as well as those of you urging me to vote “no.” For so many reasons, this is a difficult decision which I have not yet made.
I hope this is helpful.
--RoseBowl
