EMR investor sets out to teach New Brunswick company a lesson
By MICHAEL TUTTON - Telegraph Journal
By last summer Richard Coyle, a retiree and dabbler in junior mining stocks, had grown impatient with the languishing price of his shares in EMR Microwave Technologies Corporation, a Fredericton mining technology company.
He felt the company was not moving quickly enough to bring its technology to market, and was diluting the value of his shares by issuing more and more stock.
He decided to send company directors a message. For four straight months, Mr. Coyle, EMR's largest shareholder, began relentlessly selling blocks of stock, while informing managers he had "deep
concerns" about its spending habits and the board of directors' issuance of fresh stock options and private placements.
When shares fell from 38 cents to 15 cents, it reduced the value of Mr. Coyle's portfolio. But he says the losses were worthwhile because senior managers were forced to change their practices.
EMR has a patented microwave technology designed to remove metals such
as gold and copper from ore.
Mr. Coyle bought 4.3-million shares of EMR in 1996, worth 14 per cent of the company. When he sold last year, his influence was considerable. On many days in September and October his trades were the major feature of the company's activity on the Alberta Stock Exchange.
Its an example of shareholder activism that's becoming more common in
Canada.
Last month, the fur began to fly at another New Brunswick company, Repap Enterprises Inc., when shareholders balked at a lucrative compensation package for the company's chairman. Yesterday, he was ousted.
While outside shareholders of the past often deferred to boards of directors, Mr. Coyle, a retired employee of NB Power, decided to push for changes he desired, using his stock as leverage.
But to Jim Tranquilla, the president and CEO of EMR Microwave, Mr.
Coyle's selling was more an obstacle than an incentive to improved
performance.
"He made no secret of the fact he was going to punish us by basically
dumping [stock]. What that did was it contributed certainly to making it very difficult and ultimately it became almost impossible to raise financing because the price was in the sewer," says Mr. Tranquilla in a telephone interview.
"It really limited our ability to finance the way we needed to," he says. Without raising money, he says, the ability to promote the stock suffered, along with funds for continued research.
Mr. Tranquilla says he wanted Mr. Coyle to stop advising others to dump the stock. "He had personally contacted several other local investors whom he knew. He was actively encouraging them to dump as well. He was trying to create a snowball effect which we considered to be exerting undue pressure."
At times, said Mr. Tranquilla, managers weren't sure what Mr. Coyle
wanted. "Oh, they knew what I wanted," retorts Mr. Coyle. "They knew I wanted them to stop diluting my position in the company."
Mr. Coyle says his selling campaign has improved EMR.
He says that prior to his pressure, "the managers were loading up on shares" without improving shareholder value.
In addition, he claims, an "uncalled-for" average spending rate of $250,000 a month has slowed.
Mr. Coyle also says he also wanted the stock to be better promoted to
potential investors abroad. "If they were only going to sell this in the Fredericton area, then the stock was bound to only go in one direction."
He says there is news that the company has been doing a better job in this area.
Jay Taylor, the editor of the Hard Money Adviser, a New York investment newsletter that watches EMR, says other investors became spectators to the conflict.
He says he has talked to Mr. Coyle and has mixed opinions on his actions. Mr. Taylor notes that Mr. Coyle had made a previous investment in Bre-X Mines - the gold find in Indonesia that turned out to be a fraud - on which he made millions of dollars.
"I don't think he got into EMR at a very high price and he's been selling for some time," says Mr. Taylor. "It could be from one casino to the next in his opinion."
But he also thinks that Mr. Coyle has a point in complaining that the EMR managers should do a better job marketing their company.
"He's right, however, that the managers are poor promoters of the stock. I've been disappointed that it's taken so long, however I think these guys are honest fellows working on a project of some scientific virtue."
In recent months, the disagreements seem to have cooled and the selling spree has slowed. Mr. Coyle says the recent appointment to the board of Nicholas Ediger, a former president of Eldorado Resources and veteran of the mining industry, was a step in the right direction.
"With this new input the company is achieving some direction," he says. "I'm happier now."
"They're a better company for this. They were spending money like a
drunken sailer, going from one project to another like a ping pong ball."
Mr. Tranquilla, a former university professor who developed the microwave technology, sees at least a temporary reprieve.
"We think he's fired his last shot," he says. "But our annual meeting is in September, and we'll see if he any further questions there."
Mr. Coyle, who is still holding approximately four million shares of the 40 million outstanding shares, says he intends to maintain his current position. |
