Tuesday, March 29, 2011

Fair Deal For All?

Looking at Finskiy’s history of actions, I can say with a pretty high degree of certainty that he’s personally not loaded with cash. I know his buddy, Prokhorov, is filthy rich, but if Finskiy was really that rich, he would not have sold out of his Etruscan stake to Endeavour at a small profit when the stock was still undervalued. If I recall correctly, Finskiy didn’t even exercise his pre-emptive rights to one of CMM’s private placements late last year. Hence, as it stands now, I do not believe we will get a new cash offer from White Tiger. And since he’s short on cash, his plans to build a 1 million oz gold producer through WTG would be ruined if enough of us exercise our dissent rights and get paid out in cash. We are not the only ones trapped between a rock and a hard place… Finskiy is too.

Unlike most of you on Stockhouse/Igloo, I don’t believe Finskiy is out to screw us. Yes, he used the broken crusher to drive our share prices down. And yes, he didn’t honour his agreement to fund our working capital through the exercise of his warrants. But please understand that if Finskiy wants to steal us for pennies, he could’ve created a huge negative catalyst (not a weak one like a broken crusher) and stolen us for nothing. Heck, he even grew a conscience and offered us 0.4:1 rather than the 0.2:1 that we expected (yes, I know, WTG is still garbage so it’s easy to be generous giving away garbage). Finskiy’s targeting TSX listed companies for a reason… he likes to do business here. Isn’t it a little too early for him to ruin his reputation, with so little money on the line thus far? Given the broken crusher incident, I will never fully trust Finskiy. However, I don’t believe Finskiy is trying to screw us. Furthermore, I think Finskiy is a savvy businessman who is flexible to change when things don’t go according to plan.

Our main concerns with this offer is the fact that we are not getting paid enough and that WTG is a BVI incorporated company, which does not protect minority shareholders the same way Canadian companies do. Finskiy’s main concern is he wants to buy CMM but is either unwilling or unable to offer us the right price.

One way to resolve all the issues listed above is to get WTG to do a private placement to raise cash so that the offer is at least partly in cash. The private placement would either involve institutional money which would be great to look out for minority shareholders, or it would involve money from Prokhorov/Polyus. Either way, if we get paid out $0.50 in cash and 0.3:1 in stock, I think there will be a lot more support for the offer. This will be great for Finskiy as well, since he could get CMM into WTG and doesn’t have to personally pay cash doing it.

One final point I’d like to make is that I don’t believe Finskiy is averse to a white knight bid. Finskiy has put in a lot of work and money here just to get an extra 15% of CMM. If CMM is worth $500mm, 15% of that is $75mm. This is not that much money considering a white knight could come in with a bid of $600mm (or $1.30/share), and value his 40% stake at $240mm (I assume it’s still a 40% stake because I find it hard to believe that he actually disposed of his warrants to an arms length party). If armed with $240mm in cash, Finskiy could do wonders with WTG, and might even eventually get to 1 million oz annual production. Finskiy was willing to sell out of his Etruscan stake before, so why would he not sell out of CMM now? Time to find a white knight!

20 comments:

Wingfong said...

Hi Uall.. U must have put in some serious effort in this piece. My appretiation. I have the following comments:-
1)I would leave the point/your deduction that Finsky is not loaded as I do not know much abt him
2)U said his plan to build a 1moz gold producer tro WTG will be ruined if enough of us exercise our dissent rights & get paid out in cash---looks like this point is pretty worrying for him coz the threshold of 5%=20.4million shares, 7.5%=30.6million shares, 10%=40.8million shares . We have a tally of +78million in the dissent list so it is highly probable to get 50% out of this lot(I actually very incline to think it is easy to do so)
3)U said--he could've created a huge negative catalyst (not a weak one like a broken crusher). What do U think such a huge negative catalyst might be? Perhaps he has no capacity to do so? Though he might have shown one of his underhanded hands, I am quite doubtful of his total capability in spite of all the mist n cloak after seeing what a big hu-ha this deal is

Wingfong said...

4)U said..WTG is a BVI incorporated company which does not protect minority shareholders the same way Canadian companies do. Frankly this is one overiding n extremely risky consideration that weights on many shareholders including myself
5)U said..Finsky's main concern is he wants to buy CMM but is either unwilling or unable to offer the right price.Well, If he is not willing, I suppose holders of +78million shares are not willing to sell too. If he is unable, then he should not do the deal or at least wait until he has the means
6)If WTG can get enough cash tro PP or other means n offer $0.50 + 0.3:1 shares as U had suggested, well I must say there is hope for him. However, he will not get his +50% so U think he likes it this way?
7)I am hoping to see a competitive bid too

PayDay said...

Uall, thanks for your piece.

If Finisky were in the USA he'd be tarred and feathered by now with a Class Action lawsuit already in the works!

But up here we're all trying to find the good in people and Finisky is truly a nice guy who's a bit cash-strapped trying to make a go of two companies... lol

Its the typical Canadian Way, eh??

I'm under no illusions that these were all carefully calculated moves that have been in the works for some time. White Tiger = Finisky and Finisky=White Tiger, so he's been working on this since last fall after Ms Peggy Kents departure.

He had $20M to scrape together some inferior assets from his homeland (what do we Canadians know anyways?)..and then repackage this ...er...asset???? as the next great Russian motherloade, all for the bargain price of 1/2 your shares.

Mr Finisky is on a mission and it isn't to make US rich. He could have easily focused on CMM, sold over $2 this year and then gone back to working on White Tiger...but that's not the plan. Far better to exchange nothing for something and call it a day.

PayDay said...

PS. I have to disagree with your last point.

Finkisy slammed the door shut on soliciting White Knight bids when he inserted that ridiculous $13.5M break fee clause.

Go read the agreement. CMM isn't even allowed to give info to anyone who asks.

Uall said...

Wingfong,

3) I haven't given negative catalysts much thought... but I do know that his henchman, Daniel Major, is at the helm, so he could pretty much have anything done that he wants. Perhaps, a vital part of the mill completely breaks down and is terribly hard to fix? Or perhaps, the go into huge debt (i.e. $30mm) on stupid/unnecessary capital expenditures to get them to the point where they are desparate for cash? Let's just say, if they want to kill the company, they could find a way.

Uall said...

PayDay,

I understand that there is a $13.5mm break fee and that they made an agreement not to solicit anyone else (i.e. White Knight).

But please understand that $13.5mm is actually a reasonable break fee in M&A for a company $500mm (anything below 3% of market cap is generally accepted by courts). Yes, I know it's unreasonable in our case because Finskiy's behind this whole thing.

And having an agreement in place so that no white knight is solicited might actually be Finskiy's way of making it seem like he really wants the assets and sends a message to the white knights out there that the better be prepared to buck up.

bigjohn37 said...

Hi Uall. You made some useful points. There is one, which I'd like to add: the reason why we (at least 77% of us!) don't want anything to do with WTG is because of all the deception & lies we were subjected to. I, for one, would never want to invest a penny with these people, period. You can't trust them. Finskiy, of course, planned this grand theft long time ago (as is well documented by Carib's table on this Blog).
Yes, it's time to find a white knight!

Cocoablini said...

I agree that Fininsky is cash poor and screwed. He's 2 bit, not a great player and very transparent. Also, the frontrunning of the crusher incident news is pretty obvious. Hopefully the Canadian SEC is better than the hapless US SEC(or corrupt SEC.)
He would not create a catastrophic event, because his shares in CMM would also plummet and give him less leverage to borrow. He's playing it a hand at a time. He probably pumped and dumped before crusher, sold some shares and now is trying to pick them up depressed or having his stooges pick them up from the soft hand.
The banks probably OK'ed the deal knowing that he would create the crusher incident and they could make money on the "problem." Also, the crusher incident is a temporary hit to cashflow-depresses stock prices enough for the cheaters to sneak in and scoop.
A white knight offer with a 13.5 WTG kill fee is a 2 bit crook hedge. Fininsky , being transparent, can't even pretend he's thinking of shareholder value.

dave peters said...

About break fees, Lundin mining is in the news today for possibly being stuck with a $120 million break fee after both parties amicably broke off a merger:

http://www.theglobeandmail.com/globe-investor/investment-ideas/streetwise/does-lundins-break-fee-stand-a-chance/article1963122/

There was another Canadian mining merger in the news last month, it had a $400 million break fee attached to it.

$13.5 million really is nothing in comparison.

dave peters said...

I don't know how rich Finskiy is, but I have trouble believing he is NOT loaded with cash. Look at the directorships he has had and continues to hold.

http://www.reuters.com/finance/stocks/companyOfficers?symbol=WTG.TO

You're simply not both a Director of multi-billion dollar companies and running multi-billion dollar investment funds, and then paid chump change.

PayDay said...

$13.5M break fee is everything when the person initiating the fee OWNS BOTH COMPANIES!!! (is there an example of that around Dave?? I've been looking and haven't been able to find such an example)

I question the legality of this fee in the first place. Mr Finisky siphoning wealth from one entity to another.

Perhaps the $13.5M is to cover his ass in case the merge fails. Then he can take the $13.5M from CMM and use it to enrich himself with the purchase of even more CMM stock (which CMM would need to do another PP to cover his 'fee')

Uall said...

Dave Peters,

Directors (at least in North America) are actually paid peanuts (by rich guy standards). Check out the filings of any major gold company... you'll see.

dave peters said...

Uall, okay, I'll accept that about the directors. Managers of multi-billion dollar investment funds are certainly well paid, though, so Finskiy at least has that going for him. No PB and Jelly sandwiches for dinner for him. :-)

ATInsider said...

Great read Uall, and the responses are wonderful.
I have a question what is to stop somebody or some people from buying up loads of CMM shares, I am talking about in the 10M to 15M per day? Enough to make them a major shareholder such as a 15% to 25% stake in CMM. What then would Finsky do?

Uall said...

If someone bought 10-15mm shares of CMM at the current market depth, I would imagine they'll push the stock price to .60-.70 really quickly, making it much more expensive for that person to acquire more shares. If there is a major shareholder holding 15-25%, then obviously there would be no business combination without his/her approval.

I'm not sure what Finskiy would do, but if he wants CMM badly enough, he would definitely have to raise his offer with another major shareholder in the picture (he probably needs to do that now anyway).

PayDay said...

only 200,000 shares traded today so I doubt there is anyone buying up 10M shares (that probably occured on March 8 and 14)

dave peters said...

FWIW, let's not forget about the other trading networks.

Yesterday, for instance, 203,000 shares traded on Alpha. The day before, 274,444 shares of CMM traded there. Nearly 400,000 traded there last Wednesday. On March 16, over half a million shares of CMM traded on Alpha. It all adds up.

And this doesn't even consider the shares trading on the more opaque trading networks used by some institutions, that us wee fish cannot readily see.

In summary, at least a few million additional CMM shares have traded in the last couple of weeks that do not show up on the TSXV.

dave peters said...

BTW, on March 8 and 14 (the two days PayDay mentioned), there were 3,799,383 and 4,115,169 shares of CMM traded on Alpha, respectively.

http://www.alphatradingsystems.ca/alphaportal/tabid/468/Default.aspx

That's in addition to what traded on the TSXV. And, as I said, there are still other trading networks / systems to consider.

ATInsider said...

I thought the TSXV was the place for trading. Didn't know CMM was involved with other networks.

dave peters said...

FWIW, the same is true for WTG. It trades elsewhere as well. Don't be fooled into thinking that the WTG trading on TSX is all of it, or even most of it.