Australis Capital (CSE: AUSA) has seen a shareholder go head-to-head with the company over the announcement yesterday that the company would be purchasing Passport Technologies, a fintech firm majority owned by Australis’ CEO. The shareholder, Roger Sykes, outlined a number of concerns while pleading to shareholders to reject the transaction.
Sykes primary statement is that management is not acting in the best interest of shareholders, but rather is pushing their own personal interests instead at the expense of shareholders. A number of points were raised to this end:
- Australis is further diluting shareholders when the company already trades at less than 10% of its go public price.
- Australis has already issued 1.8 million shares to Passport for “consideration for certain services and rights under an agreement with Passport”, in addition to consideration already paid for a licensing arrangement, which is said to continue the trend of related party transactions.
- There is no evidence that the transaction will create value for shareholders despite the $31.4 million price tag, however the CEO is set to benefit.
- The value of the assets of Passport, nor the revenue of the company has been disclosed. No disclosure related to purchase price discovery was provided, thus the purchase is of unknown value to shareholders.
- The company is selling $4.6 million in “real assets” of Green Therapeutics, which is a key cannabis asset in line with the issuer’s stated mission. The sale is to Passport as per the shareholder.
- If the transaction fails, Dowty still stands to benefit due to a high break fee of US$2.5 million.
Further, the shareholder goes on to state that “this transaction appears to be another example of a series of poorly executed and poorly communicated transactions aimed at enriching Mr. Dowty,” a strong accusatory statement. The actions are said to transition Australis from its roots as a US cannabis firm to that of a fintech operator.
Finally, Sykes claims that the management and “out of touch” board don’t desire to pursue Australis’ founding vision. Rather, they are pursuing a related party transaction for which no merits have been properly described to the issuers shareholders.
Australis Capital last traded at $0.25 on the CSE.
Information for this briefing was found via Sedar, Robert Sykes, and Australis Capital Inc. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.