CEO Craig Cooper and mate Niall Cairns seem set to control CardieX
The energetic duo – the "2Cs" – are likely to next week lift their combined equity in CardieX to near 20%.
But there’s more. Within the next six months they plan to hoist their stake to 22.6%.
And there may be more. Craig Cooper controls three tranches of options over parcels of 8m shares
He can exercise Tranche #1 if/when the $CDX VWAP stays at 5c for 30 days. On my calculations, this tranche will be exercisable next Monday, January 25.
EGM
The next day, Tuesday, will be a big day for CardieX. Why? Because CardieX is to convene an EGM.
The meeting will be held at 10.00 in the offices of CardieX auditor, BDO, on Level 11, 1 Margaret Street, Sydney. (Anyone here going?)
It will be the last CDX meeting presided over by Donal O’Dwyer. He will step down from his 14 year chairmanship after the EGM.
He'll be replaced by Niall Cairns, albeit on an interim basis, pending recruitment of a chairman based in the US.
In 2018 CardieX paid Donal O’Dwyer a salary of $55k. In 2019 CardieX is paying Cairns a salary of $84k pa. That represents an increase of 52.7%.
Approve
Niall Cairns and Craig Cooper want Tuesday’s EGM meeting to approve issue of:
. 98m shares to instos CVC, SG Hiscock and sundry investment pros and sophs at 3c
. 1.67m shares to Donal O’Dwyer at 3c
. 1.5m free options exercisable at 5c to CDX director King Nelson
. 1.5m free options exercisable at 5c to Niall Cairns and
. 24m free “Performance Rights” (value $237k) to Craig Cooper
Quite separately, CardieX is paying Craig Cooper a salary of $422.5k ($US300k)
Performance Rights
The 24m performance rights are divided into three lots, two of 4m shares and the third for 12m shares.
What’s the group’s explanation for the option terms: They are “a cost effective and efficient means for the Company to provide incentive to its personnel as opposed to alternative forms of incentives such as cash bonuses or increased remuneration.”
But shareholders will be asked to approve something else – the issue of 2.5m $1 convertible notes to C2 Ventures, the CardieX cornerstone and underwriting shareholder owned jointly by Cooper and Cairns.
The notes will be convertible to shares at 3c.
Assuming the EGM approves the convertible note proposal, C2 Ventures will immediately convert $1.95m of the notes into 64.2m shares.
This will give lift C2 Ventures’ shareholding to 139.2m units – equivalent to 19.96% of capital.
Controlling?
What then? C2 Ventures plans within six months to convert the remaining $575k note balance into 191.7m shares.
C2 Ventures will then emerge with 22.11% of capital.
And if/when Craig Cooper converts 8m 5c options in Tranche #1 to shares, the Cooper/Cairns stake climbs to some 23%.
The next option performance hurdle is 8c – for some on these HC threads that’s not too far away.
If/when Craig Cooper converts 8m 8c options in Tranche #2 to shares, the Cooper/Cairns stake climbs to near 24% and so on.
Now 22%-25% is clearly not a majority interest. Is it a “controlling” interest?
According the Top 20 list posted on January 11, the next largest holder in CardieX is Sydney surgeon Paul Cozzi with 3.58%.
Assuming Cozzi hasn’t been trading in recent weeks, this stake will be diluted to a modest 2.49% after the EGM.
Return of 114%
Quick background: Less than 15 months ago the 2Cs start with nothing. Cooper becomes CEO on Nov 30, 2017. He files a Nil shareholding notice.
Then, in April last year Cooper, Niall Cairns and broker Taylor Collison organize a placement at 2c a share. The 2Cs subscribe $1.5m - $750k each - through C2 Ventures.
Six months later, in December 2018, Cooper, Cairns and Taylor Collison run a similar operation. The 2Cs subscribe $2.5m - $1.25m each - at 3c a share.
Their combined placement outlays of $5m computes to an average of 2.85c a share.
Today, $CDX closed at 6.1c – meaning the 2Cs are scoring paper profits of 3.25c on each share. This represents a return of 114%.
Thin Air
In simple terms the 2Cs have put in $5m and created $3.5m, as if out of thin air.
Plus they’ve gained effective control of a global virtual health group with FDA clearance for the planet’s best central blood pressure tech. Plus multi-year contracts with US health giants Anthem, AmWell and Kaiser Permanente.
Are the 2Cs financial geniuses? Perhaps. Are they ultra-smart financial engineers? Certainly.
GL to them. And GLTAH.
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