Courtesy
amnesic on the LSE board:
After scanning a few recent posts here, many comments seem quite narrowly focussed, so I thought I'd jot down some of my thoughts on the proposed Performance Rights Plan (PRP).
The PRP concept is following industry norms. It was the idea of the company's remuneration committee, not Dave himself, and follows Corporate Governance Council Guidelines.
The PRP is not just about Dave. It is about the company being able to offer the whole team appropriate incentives. Dave is mentioned specifically in resolution 2 because he is a director, but the scheme is designed to "reward the performance of the Directors and employees in achieving specified performance milestones within a specified performance period".
The company is calling a special General Meeting (GM) for this vote now, rather than wait until April 2019 for the next AGM. The timing is clearly very important. The next few months offers us huge opportunities to build value and every shareholder expects/wants/hopes that the whole of the 88E team will do whatever it takes to:
- provide all necessary support to potential partners to get the best possible deal for both conventional & HRZ farm-outs;
- ensure Yukon seismic is fully analysed and volumetrics are released ASAP;
- as well as ensuring everything necessary to plan and prepare for the 2019Q1 Winx drill happens on time.
Much time critical work, involving supporting people/companies across many time zones too. I imagine that will stretch the team quite a bit from usual workloads - possibly many months of long days weekend working and international travel away from home.
Some argue "Why should we incentivise the team just to get the SP back up to where it was a while ago?". The lack of clear success of IceWine2 was not a fault of the team. It was always a likely outcome. So why wouldn't we now want to properly incentivise the team to improve the SP as we would at any other time.
For those sitting at a loss, whilst thinking about those losses, also think about what additional losses Dave and the team have saved you from. In the Feb-2017 presentation, Dave was warning "when it boils down to it, it might not work. There's a 50% chance that it's going to be a lot of value destruction here". As a single project company, at that time, news of a duster was highly likely to yield an overnight drop of around 75%-80%! As it played out, realistically between pre-drill 2017 and post-suspension-2018, share price is down from a ~2.65p level (ignoring spikes) to ~1.15p level now. So we're actually only around 55% down. It was no cliff fall either! The decline mostly occurred over days/weeks with many opportunities to exit positions. Additionally, potential impact of failure was mitigated very nicely by Dave bringing Yukon Gold & Western Blocks into the portfolio. SP chart ->
https://snag.gy/BiHXoc.jpg
The long-term cost to each shareholder for this scheme (the potential dilution) is tiny. The cost to you of not having a fully motived, engaged and committed team through the next few months could be hugely significant. Dave said he'll not quit regardless, which might prove true, but do you want to gamble that other critical members of the team will not throw in the towel when the going gets tougher, because they're not being offered anything more for going the extra mile?
The PRP isn't just about Dave getting 32m shares if the SP hits particular value. Only 60% is based on SP. Most of the other 40% is based on achieving increased reserves, resources & production. Why is it weighted so much on SP - probably because the SP is what you and most investors care about! The 32m shares figure also a theoretical maximum, based on meeting/exceeding all targets. There are realistic minimum targets before any reward is given, from which it scales up to a maximum. Also, the actual reward will be the LESSER of 32m shares OR "Base Salary X 3 (being years covered by tranches) x LTI % (being 50% for Managing Director) x 60 day VWAP of the 88E share price on ASX at approval date"!
I'll be voting FOR both resolutions. You vote how you like, but first ponder very carefully whether doing so may in any way jeopardise us winning the best possible farm-out partner, or cause delays to planned milestones. Also weigh up how other investors may view the risks for the company should the resolutions not be passed, or how they might perceive a company where the investor base does not fully support the BoD. Quite frankly, if you believe the BoD is putting forward resolutions to meet their interests over yours, then don't vote at all, just sell up!
GL
(20min delay)
