LAST POST -- To All - I apologize in advance for this long post summarizing my thoughts.
Having just returned from travel, I see there's been quite a bit of discussion these past few days. To many of you who've been in ACEL for years, this must begin to feel like quite the familiar circumstance. Bright promises, leading to high hopes, followed by a stiff dose of disappointment and reality. Company management following up with no substantial explanation or strategic plan. Shareholders confused as to how to proceed, and no clear consensus.
We went through this same scenario most recently after the relisting in 12/96, when the share price began its decline, and volume dwindled. A number of shareholders, including myself, worked very hard to initiate a responsible line of communication to ACEL management; to ask for needed information on the company's financial plans and strategic direction, and to offer guidance representing the thoughts of many shareholders. We failed. ACEL management was not particularly interested in modifying their business conduct based upon our questions or concerns.
Subsequently, we began an initiative to consolidate a constituency of shareholders dissatisfied with the responsiveness of ACEL management to shareholder concerns, with improving shareholder value being a prime consideration. I agreed to develop and maintain a confidential database of ACEL shareholder information on behalf of all. We defined a number of actions (improved shareholder communications, trial progress updates, reformation of the Board of Directors, and more) that we deemed important for ACEL management to act upon.
As a result of our efforts, we were able to identify shareholders controlling approximately 2.5MM shares of stock, or approximately 17.1% of the company. I know from first hand conversations that ACEL management was acutely aware of our potential to effect their operations. We can take some measure of credit for the long overdue reformation of the Board that took place last year. However, I believe that our success resulted in a successful full-court press by some to personally contact key shareholders and brokers to dissuade them from further supporting our effort. As a result, we indeed lost a portion of the support that we had worked so hard to build. ACEL management was also successful in passing Propositions 3 at last year's shareholder's meeting that created a mechanism that could be used to ultimately remove control from the shareholders on any issue, at the Board's discretion.
So, where does that leave us now? Without belating the obvious, our company is extremely vulnerable to three possible actions, none of which are particularly beneficial to shareholders. In no particular order.
First, ACEL is plum ripe for picking. With a drug in Phase III FDA clinical trials that's been proven effective against virtually ever solid tumor cancer against which it has been tested, and $5MM in the bank, anyone could walk in and buy a controlling interest in the company for little more than the ready cash in the pot. After all, the market cap is now down to under $12MM. Therefore, from purely a business standpoint, it would be extremely unlikely if we did not receive a buyout offer shortly. What bothers me is that during the famed shareholder teleconference last week, Gail specifically avoided saying that a buyout would not be considered. If fact, she said something to the effect that the Board and ACEL management would give due consideration to any offers received. I don't know about you, but that doesn't make me sleep well. Any deal like this will likely net investors about $1-$2 per share, by my estimates. As I've mentioned before, my personal breakeven is around $12.
Second, management has substantially diluted their stake in the company over the years, through questionable financing practices. This would be a perfect time to reassert their relative control over the company, and any eventual success, by repurchasing shares at distressed prices. If we see a host of insider BUY orders trading anytime soon, someone ought to have a talk with the SEC, as quite a circumstantial case could be made for a dump and pump (a reverse pump and dump) based purely upon events that have transpired.
If management has any confidence at all that the Phase III Meso trial will result in an NDA for Onconase, this would be the time for a company repurchase of shares in the open market to compensate for past financing blunders like the most recent one concluded with Aries/Paramount. Unfortunately, the company may not have the funds available to do so. However, it's reasonable to assume that repurchasing cheap shares now could be resold a higher price later, thereby increasing our relative cash on hand. I leave the fine points of that calculation to someone with more time on their hands than I.
Third, the company could continue operating as usual, and we will likely be delisted (again) in the near future. I can't recall off hand, but I believe that NASDAQ rules limit the amount of time a security can trade below $1/sh before they issue an intent to delist warning, after which a security must trade above $1/sh for at least ten (?) consecutive trading days or be delisted. Delisting would almost certainly doom any prospects for improving value for the current crop of shareholders.
Now, given these prospects, are we all happy????
I personally have too large an investment in ACEL to write this one off. Further more, I believe that it would be morally wrong to let what I perceive to be a long-predicted business travesty go unaddressed. Without naming names, there are a number of influential brokers whose client's each control more than 500,000 shares. At 500K a pop, it doesn't take too long to put together a respectable position of influence. Likewise, there are a number of individual investors who each control 50K, 100K, 150K shares and more. As I've said to many of you in private conversations offline in the past, no change can come WITHOUT YOUR SUPPORT!
While many substantial shareholders and brokers were dissatisfied enough to offer their support last year, many of you were afraid to jeopardize your "relationship" with company management. If not now, what will it take for you to finally begin worrying more about your relationship with all those whom you put into ACEL shares over the years?? It's really crunch time, NOW, guys (and ladies)!! Collectively, we've lost over $100MM in the last 18 months. As a famous Congressman, Les Arends, once said to the Pentagon back in the '60's, "a hundred million here. a hundred million there. pretty soon you're talking about some real money!" I'm ready for a change, and I hope that every one of you will join me in pursuing that objective.
Speaking of "change" and "objectives", I would like to offer the following gameplan.
ú I have concluded that the first thing we must do beat the bushes once more to establish a list of all dissatisfied shareholders. Since I already have the original database started last year, I would like to ask that if you agree with this post, to send me your shareholder information, as follows:
Full Name
Occupation
Address
Telephone numbers
Fax numbers
Email addresses
Shares controlled
Please send the above information, in confidence, to jjenco@epri.com. I will not release information pertaining to the size of your investment to anyone without your written consent in advance. If you do not have an email account, you may fax your information to (704) 597-8866.
ú Concurrently, we need to identify the process and requirements for nominating new Directors to the ACEL Board. If memory serves me, there are some time constraints on this. Since the last annual meeting was in early December, we have only a week or two to formally nominate new Board members to the company, for inclusion on the forthcoming proxy ballot. If there is someone willing to take the time to define these nomination issues immediately, please contact me ASAP with your results, or post them on this thread.
ú I would also like to begin collecting an "oral history" of the company, from before Day One, so that I can compile a complete reference on the historical development and business decisions made by the company to date. If there is anyone interested in furnishing me with written factual commentary, I would greatly appreciate anything submitted and will not disclose the source.
There are several other actions that we will need to eventually take, some sooner than later, to protect our investment in the short term as well as ensure it's best chance for long term success. For the time being, let's all focus on putting together a strong shareholder constituency based upon protecting and increasing shareholder value.
Several persons have indicated a desire to hold an informal shareholders meeting. While attending such an event might be soothing to our collective souls, it might be premature. I would suggest that we work hard to establish just how many shares we can control as a voting block, first. If we can put together the necessary coalition of shareholders to actually represent a force to be reckoned with, then I would be all in favor of the idea. but first things first.
Finally, if anyone is an attorney, preferably with familiarity in either corporate finance or securities law, please contact me. Likewise, if you are a knowledgeable shareholder or registered broker with easy access to available securities trading information and the inclination to do some research on past trading activities, please contact me.
As a timeline, I think that the company must formally receive three (3) nominations for new Directors before August 8th. I think that we need to target September 30th as an informal end date to consolidate our shareholder alliance. I think that we need to target October 15th as the date for advising ACEL management and the BOD of our constituent concerns, and our specific expectations for changes in business practices. I think that we must require a written response from ACEL management, pertinent to their intended actions with respect to the above expectations, by no later than November 1st.
I believe that to be enough said for the moment. Once again, I cannot encourage you enough. If you support exercising greater control over our company in favor of protecting and improving shareholder value, then I strongly urge you to submit your shareholder information to the database as indicated above. Likewise, if you know other investors in ACEL, or brokers who have sold ACEL to their clients, I strongly urge you to seek their permission to furnish me with their telephone number/email address, so that I can contact them to solicit their support.
As I've said before, we can only succeed if we all pull together. I see no other acceptable way out. I urge you to stop relying upon ACEL management's promises and whisperings to increase your investment. Look instead at your investment portfolio, and act according to your senses.
I look forward to your considered comments. -John Jenco
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