For the week ahead, the company has recently announced an organizational change which I think was overall a really great move. Robert Day is now acting as the interim CEO, as well as bringing an incredible career and track record to the back office as CFO. Since Robert Day has come to office he has communicated a July audit completion date for the company’s first year and October for the company’s second year, he has also reported positive EBITDA of over $1.0M for the first quarter.
I don’t see any specifics on why people believed Kalyan was not well fit to be CEO, I think as with most rollup companies the founders who start the company reach a point where they need to sit back.
The reality is that the lawsuits out about the company most surround negative attention in how they acquired companies through seller notes and potentially restructured them after the fact. That’s private equity, anybody foolish enough to not realize that this happens on both sides for both reasons is naive - the renegotiation of a seller note in acquisition financing is almost always the result of an acquisition not performing online with managements growth expectations at the time of the sale (ie seller forecasting and validating their company too aggressively). Personally I’ve seen this happen in almost over 90 closed merger and acquisitions that we’ve directly advised on.
Robert Day has been actively speaking with top institutional banks - point of convertible debt - convertible debt is not toxic to a company and is priced like equity in the event that it converts from debt to equity and to not realize that is inexperience. Futuris is currently in factoring arrangements with top tier lending institutions with an APR equivalent of approximately 16-18% which is another testament to the company for both its size and growth - and Robert Day has been actively working to decrease the cost to a more appropriate level (we’ve financed $42M in credit revolvers for mulitple companies including Primo Field Services and Sky Quarry at Prime + 2.0% all of Q1) and negotiate a stretch facility to enable further growth by way of acquisition. Multiple top tier lenders are heavily and deeply engaged in conversations with the company.
All in all we are very long this company, we believe that the original management team has made a strong decision to transition the company in the best interest of the shareholders to the next phase of management, and we believe that the math is simple - the market cap is so out of whack with the current company valuation as a result of shorts and non-active market making, and that the transition to executives of Robert Days caliber are an excellent positioning strategy for the benefit of the shareholders in this company’s long term growth or that this couple company could be an attractive target for a private equity partner to help facilitate a much larger rollup strategy.
