Listen to our latest Investing Matters Podcast episode 'Uncovering opportunities with investment trusts' with The AIC's Richard Stone here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
I think I'll be voting against all four of the motions.
I thought I'd vote for the change in the Articles, but the one relating to board remuneration is putting me off.
Apparently, our board is insufficiently motivated and all need more money to ensure that they become so, and the good news is that this can be achieved under the guise of improved corporate governance. Well, forgive me if I don't see it the same way. They are all well paid enough already and if they feel they are lacking a reason to get up in the morning, I suggest they find another job.
Agreed Addicknt I will also be voting against the motions.
I support the BOD, but to me this looks like a win win situation for the BOD no matter what the share price does.
I don't understand Redknight's earlier post as he puts in the relevant information and seems to ignore what he has said and support higher wages if they fail on the share price and a higher bonus with higher wages if they succeed on the share price.
That is not a proper incentive package for a company that doesn't earn any revenue at the current time.
Addicknt and Quady - posts of the day!
Z
Q, absolutely.
It's very easy to envisage a situation whereby the share price becomes inflated simply by virtue of bid speculation. The board will have done absolutely nothing to achieve this, but their remuneration will increase.
I also don't like the fact that we have two new directors and the first thing the board seems to be concerned about is how can we give them far more money than we we agreed to pay them only a matter of months ago? They accepted the terms they were offered and I have seen nothing to suggest they are suddenly worth a lot more.
I know I'm a bit old fashioned about this sort of thing, but I really don't like it.
Pretty much my thoughts (and some others I know on here too) there addinkt!
Resounding no on all fronts from me!
Rs
Bn.c
Well spoken BNC, we need a sensible way forward and the PI's hold the sway.
I agree totally with addicknt's original post. It strikes me that with this kind of nonsense going on, and millions being found missing, the SP would normally have fallen to 19p - because if this is all there really is in front of us right now, it's a pretty poor show with nothing, absolutely nothing, to offer or entice a PI to buy in or hang on for the next several years.
The gravity defying 32/33p level we are currently suggests strongly to me that there's a definite bid possibility swelling beneath us that is not built on the froth and frenzy of speculation. We don't seem to have any fly by night merchants on the board right now hyping this up, and I don't believe recent big buyers have exited. So if the machinations of the BoD haven't justified this 32p level, what is justifying it? To my mind, the downward pressure of management failings is being equalised by the upward pressure of the likelihood of an imminent bid - otherwise we would (deservedly) be back at 19p because what's on the menu right now is slim pickings for us PIs.
Morning LunchMoney, I have read your well reasoned argument.
However for me, I want to hear about the advanced build of Alpala.
I find resolution 4 to be short terminism.
The share price on this share goes up and comes down. For me it's the wrong metric. Let's have a system that rewards progress.
So for example, options that are exercisable on the journey of building Alpala, and makes the director's focus on its core business.
Quady, without wanting to sound like certain others, there's a reason they might not want to tie their remuneration to operational milestones...
You would think that share price is linked to progress and metal prices, so there's still some correlation.
I agree with you that not enough is really said about medium term plans. Now the PFS is out it's time to hear about how SOLG plans to develop Tandy and Alpala through to nameplate production, regardless of whether we think its going to happen or not.
You're wasting your time Bozi.
Quady is stubbornly uncomprehending and NEVER admits he's wrong or apologises.....
RK1 - that may well be the case but we are keen to maintain that everyone has the right to an opinion providing they are not being abusive or offensive.
I do share some common ground with Quady on certain topics but I do believe here that aligning remuneration with shareholder returns is fair.
Quady - for example, if Lasso woke up one morning and decided that no more shovels were to hit his lands then SOLG would struggle to meet it's operational targets. The share price would drop like a stone and we'd return to being a penny stock, so what you're proposing and what has been proposed does go hand in hand.
I still maintain that it isn't for the management to manage the share price (they should manage the company) but the proposed incentives mean they now have to take an active interest in investors returns if they want to receive top dollar.
Morning RK ...... In your opinion, in the "normal" course of events, would any of these items require an EGM. Surely in "normal circumstances" they'd have simply waited until December for the next scheduled AGM??
This meeting has been called on the last day of the current financial year for a reason...bearing in mind it's the first time for 12 years we have felt the need to call an EGM ...... In my opinion this is their last chance to issue options at anywhere near these levels and they know it .
Totally agree with you re Q too
Sorry LunchMoney you are correct, I answered on the 4 articles. I just want a proper roadmap.
The good news is we are getting there. To be honest, I don't think enough PIs will vote, it will be the major block holders.
They would probably argue that they needed too finally tie up the corporate governance but I don't believe anyone would, have pilloried them if they'd waited until December...
And they've agreed salaries on appointment for Darryl and Ayten...so...
This looks like a naked opportunity to provide generous 'parachutes' for those two and probably other Executives in the event of a takeover bid.
It is fair to contend that a potential remuneration of almost £5m a year if all Short Term targets are met, is excessive for Darryl and neither he nor Aytewn have options.
Although it is right to point out that the EGN was originally scheduled for May, the June 30 date looks uncoincidentally like a determination to get these proposals agreed in time to announce options packages the following day or soon thereafter...
However...I've just checked GGP and they have 103m options outstanding of which 98m are exercisable between 1.5 and 3p. Indeed Directors made aggregate gains of £4.83m during the last financial year...
However, total salaries for 2020 were a mere £928k split between two Exec Directors.
Meanwhile the outstanding options at ATYM at their last year end were 3,841,750 exercisable at an averge price of £2.154, cf a current SPO of 385p and...
The total remuneration for Board and Executives seems to have been 2.335m Euros in 2021 and Alberto Lavandeira, who brought the company to production, took the SP from 80p to 450p and produced EBITDA of 199m Euros on T/O of 406m Euros from 15.8m tonnes of ore mined, appears to be on 546,000 Euros a year...
So in conclusion...
The prospective options and potential earnings for Darryl especially are excessive, but...together with the exercise price of 56p and the rush to establish all this by june 30, suggests that the whole exercise is in contemplation of a possible takeover bid(s).
Indeed, why would Darryl or especially Ayten join the company at a time when the market was rife with solid takeover stories unless they were richly compensated in that event.
PS...
SOLG MCap 751m
ATYM £538m (but P/E of c3.0 times EBITDA)...
GGP £509m
Bid this month Red
Another bit of nonsense from Redknight.
He says: Indeed, why would Darryl or especially Ayten join the company at a time when the market was rife with solid takeover stories unless they were richly compensated in that event.
The answer to that is they joined on a package that was mutually agreed.
This has nothing to do with a bid.
Remember just a few days ago people where saying this is because of a bid.
We now know it's nothing to do with a bid.
But people like Redknight twist facts so much that you end up with nonsense.
My views on the remuneration/risk issue are founded on two strands of thinking; the broader question of director rewards of public companies and the specific issues relating to our business.
The second point has been well covered by people on here and looking at the responses it appears people are unhappy with the proposals.
On the first point, over the past twenty years we've seen public company directors reap massive rewards for virtually no risk to themselves. This trend was driven by them being of the opinion that they deserved the same level of return as those who ran private equity owned companies - this is just plain wrong. When I did my first mbi in 1989 I invested 200k, of which I had to borrow 100k. I was 33 years old and this represented everything I had. As I had a young family it was a massive risk. You will never see a public company director take the same level of risk and yet they expect the same return.
Director remuneration is a running sore and is totally out of hand and personally, I find it abhorrent. In situations such as ours, options are being offered to provide a private equity type return and yet we have a CEO who, as yet, hasn't spent a penny of his own cash and I'm afraid I don't approve. (btw, I'm not being critical of DC, who I reckon is a good CEO. But I'd be far happier if he ponied up 500k) It'll be very interesting to see how our main investors react.
Just to complete my personal anecdote, one of the guys who was due to join me in the mbi got cold feet at the last moment and dropped out. He went on to become CEO of one FTSE 100 company and CFO of two others, all household names and from which he's recently retired.
He did not invest a single penny of his own money throughout his career and has made far more money than me. More fool me. Btw, we remain good friends!
He did it right Addicknt!
My thoughts on the proposed motions, in no particular order:
- "The Non-Executive Directors are not eligible to participate in the Company’s performance-related incentive plans". So all of this huffing and puffing about the board filling their boots with loads of options before a takeover is incorrect imho. Currently there is only one Executive Director, and that is Darryl. I assume once the CFO starts, there will be two. But ALL of the rest of the board are NEDs and therefore do not receive the long term or short term performance incentives.
- Seems to me the main point of this new performance plan is to attract NEW executive directors and executive employees, i.e. all of the experienced management that Solg is going to need if it plans to construct Alpala and develop the other targets (bearing in mind that regardless of what any of us think of the likelihood of that, that is the company's stated goal). The company has no revenue, it can't just keep handing over large guaranteed salaries regardless of performance. Therefore it has to use performance based incentives, equity compensation etc to attract talent. And that is the key point, if you want to attract the best talent to run the company, you need to offer competitive compensation packages. Look at how good Darryl has been since he joined, do you think he would have taken the role if they offered below-market comp?
- The strike price of any options to be issued is not 56p. That is the weighted average exercise price of the outstanding options under the current arrangements (the Existing Plan). The new Long Term Incentive Plan Rules and the Performance Bonus Plan will replace the Existing Plan. There is no set price specified for any future option awards.
- Obviously any unvested long term awards will vest upon change of control. It's a known fact that Solg is seen as a takeover target. Why would any serious candidate take an executive role at the company if they thought they could lose their job and their unvested awards in less than a few years? Also what this means is that any awards already granted but not vested are accelerated. It is not saying that if a takeover occurs every director will be gratuitously showered with cash which they hadn't otherwise earned or become entitled to.
- Having said all of the above, the CEO and Executive Director maximum awards do seem very high to me. Multiples of base salary seems a lot. How are we supposed to assess how likely it is that these maximum targets would ever be met? What is the likelihood of awards being minimum, target or maximum in any given year? Does the name suggest that the board expects most execs to reach target most of the time?
- "payments on termination for Executive Directors are restricted to the value of salary and contractual benefits for the duration of the notice period." Is this an admission that Nick Mather's severance payment was egregious and that sort of thing cannot happen again?
Good post, rcgl, and I think you're correct about the NM severance package.
Bozi, you're not wrong there! Mind you, I could never have spent my career in a large corporate - I loathe them.
Agreed Add ..... could never be suit bound or desk bound...... I'm sure the rewards are there but only after most of life has passed you by
Interesting isn’t how often people are large or small company people. I worked for the largest private company in the world by turnover. Loved it.
I often say to kids starting out, that soon they will be able to work out whether they are a large or small company person. Often defines your career.