Awalé Resources Faces Shareholder Pushback Following Insider Sales Prior to Financing

Awalé Resources (TSXV: ARIC) finds itself embroiled in shareholder discontent after recent insider sales were disclosed the day before announcing a financing for $10 million.

The saga began on April 16, when three insiders reported insider transactions that had occurred earlier in the month. Company chairman Robin Birchall indicated that he had exercised 200,000 options on April 4 at a strike of $0.12 per share, before turning around and selling them for gross proceeds of $164,600 on April 8 and 9, at prices between $0.81 and $0.83 per share.

CEO Andrew Chubb meanwhile indicated on Tuesday that he had sold 298,400 shares worth $249,164 on April 8, while director Derk Hartman reported he sold 100,000 shares worth $83,500 on the same date.

The day after the filings were made, Awale announced a $10.0 million bought deal financing with Canaccord Genuity, at a price of $0.62 per unit – substantially lower than the price at which the executives sold. Each unit contained one common share and one half of a common share purchase warrant, with warrants priced at $0.80 per each, and containing an expiry of 24 months.

Investor response

The response from investors, was less than welcoming.

Allegations of market manipulation are abound. Market observers have been stating that the sales contributed to a decline in share price, allowing the financing deal to proceed at a lower valuation.

Company chairman Robin Birchall meanwhile has become a frequent target among investors, with one market observer alleging the withholding of information from the board and the orchestration of a deal at a lower price than initially proposed.

The claim includes a supposed rejection of a purported deal to raise $10 million at a price exceeding 80 cents per share, a move reportedly made without board consultation. Instead, Birchall is claimed to have opted for a bought deal with Canaccord Genuity Corp., a firm with which he has previous ties, at a lower price of 62 cents per share.

In response to mounting criticism, a call for action reverberated across social media platforms, with observers highlighting the perceived impropriety and urging Awalé Resources to reconsider Birchall’s position within the company. Suggestions ranged from his removal to the complete overhaul of the financing deal, advocating for a higher price to better reflect the company’s value.

“@AwaleResources this is criminal, please at the very least remove this guy. Ideally the [private placement] should be redone at a higher price,” wrote X account Double Down Capital.

Awalé Resources, in an attempt to address shareholder concerns, announced an increase in the participation rights of current shareholders in the financing days after. This adjustment allows shareholders to maintain their percentage holdings post-offering, with the opportunity to purchase additional units at the offering price.

The funds raised through the offering are earmarked for the advancement of the firm’s projects in Côte d’Ivoire, along with bolstering working capital and supporting general corporate initiatives.

Closing of the offering is expected to take place around May 8, 2024.

Despite the pricing at $0.62 per unit, the equity has managed to remain elevated from the offering price, last trading at $0.73 per share.

Information for this briefing was found via Sedar, Investing News Network, and the sources and the companies mentioned. 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.

Leave a Reply