Geomaque Toxic B warrants: Company has a serious issue to address. I sent this email to John Paterson, President, GEO and James McClements, Resource Capital the holder of the B warrants on Friday, Aug. 31. Have heard no response. Closing stock price for the first three days of the countdown: 9.5, 9.5, 9. Note e mails below. My next step is also to e mail potential white knights, and would encourage all GEO sharehoders to do same.
Mr. James McClements, Resource Capital: rcf@rcflp.com
Mr. Jon Paterson, President Geomaque: jpaterson@geomaque.com, phone is (416)956-7470
Sirs,
As a holder of several hundred thousand shares of Geomaque, and a member of a now dying breed of investor (in junior mining and exploration equities), I was stunned beyond belief to learn of the terms of the "toxic" B warrants Research Capital (RC) has a right to exercise in early October.
To review the terms as I understand them:
The warrants can be exercised between Oct. 1 to 10, 2001.
There has been no mention in public disclosures about any "minimum" conversion price. If there is no minimum then Resource Capital (RC) can use the twenty day average price prior to exercise to determine it's price. Further it may take a further reduction of 25% of the average price. The "toxic" countdown will begin this coming Tuesday, Sept. 3. RC could use the trailing average between that date and October 10th to get the best price.
If we were to use the current trading price of 8 cents, it is easy to see that severe damage and dilution to existing GEO shareholders will ensue. The 25% discount would establish 6 cents as RC's price. RC would convert the US 825K to Canadian funds (today that would be approximately $1,275,000). That amount would be exercised at 6 cents, and RC would acquire 21,250,000 shares in GEO common stock. In effect RC will acquire 27% (21.25 million of a new float of 78.6 million) of the entire company for a mere $US 825.
Now, if both Mr. McClements and Paterson are prepared to tell me that's all GEO is worth, then I will end this matter here and now, sell my shares, and urge others to do so as well. However, if this is a horrible and critical mispricing of a fine asset because of a miscalculation on Mr. Paterson's part and an advantage checkmate on RC's part, then I will not sit still for it.
Mr. Paterson, I believe it is your fiduciary responsibility to reveal these terms clearly and fully to all GEO shareholders. And if you don't, I will do so to the best of my ability on various chat lines where in the past I've been a booster. I would strongly prefer that you be the one to address this however, and time is of the essence. And finally Mr. Paterson, I am more than a bit miffed about your brief, perfunctory e mail back to me Friday concerning this toxic warrant crisis. I can only assume that's how you are dealing with other shareholders as well? I for one, won't forget.
The countdown is about to begin, and this is untenable for all GEO shareholders, and I hope management. In fact, I submit it will be untenable for RC as well, especially if they intend to use strong trading markets as an eventually exit strategy. In fact, sitting in Mr. McClements shoes (and I'm no dummy) about the only course of action for me to take, if I elected to create 21.2 million grossly mispriced shares, is to find a private transaction buyer for the whole company. Surely, you don't expect even committed shareholders like me to coming running back in to the rescue and take this off your hands at premium prices at a later date? I'm telling you flat out, that if you bring another flood of cheap shares on top of what is already there, you will never get out from under the heavy load of small, discouraged GEO shareholders. GEO will be trashed for a long time to come, and frankly I've had about enough of this kind of crap in this sector.
I would encourage both RC and Mr. Paterson to try and resolve this in a manner that avoids this. And quite honestly if you can't resolve it, I would urge both of you to sell this company. Mr. McClement will have the controlling shares and given the circumstances of GEO's undervaluation and busted crop of shareholders, I would suggest that a "private" market transaction or consolidation will be the only effective cure for what will ail Geomaque. If a flood of new shares is what transpires out of this, I will actively support RC in an endeavor to find new ownership. Regardless, I await your response.
Sincerely,
Russ Winter |
