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By Tom Winnifrith, The Sheriff of AIM | Monday 26 June 2017
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
As we saw earlier as I relayed the sordid take of Rita, her brother and Belle Trace, not so lovely Riita Whittington, the shamed and embattled CEO at Magnolia Petroleum (MAGP) entered a service contract with her employer on 11 November 2011. On 2nd June 2017 the company received a GM request to, inter alia, fire Rita. So what to do?
On 5th June Rita signed a new service agreement which had a “Commencement Date of 31 March 2016.” But that is a red herring, the key issue is that it was agreed and signed post GM requisition. So what has changed?
According to Magnolia’s Admission Document (15/11/2011) all the executive directors at that point had 6-month notice periods. Rita's new service agreement gives her a 12 month notice period. This means that if the GM goes the wrong way (for Rita) her payoff doubles tyhanks to her new contract signed 3 days AFTER a GM request to oust her! The additional cost to Magnolia shareholders is c$177,500. Knowing that a GM loomed and that Rita would almost certainly be voted off - as explained HERE - changing this contract is little more than plain theft.
Those losing are long suffering shareholders, the winner is Rita. How on earth can Rita's fellow directors have agreed to this? This is a truly shameful rape of corporate governance standards. This alone should see hapless Nomad Cairn, demand the immediate sacking of Rita - she is simply not a fit and proper person to run a cat's lavatory let alone a company on "the world's most successful growth market".
It gets worse...
According to clause 3.1 in Rita’s November 2011 agreement she was “employed on a full-time basis”. Rita’s new agreement uses words to the effect that she is not contracted to work for a set amount of time as it is impossible to allocate a time allocation to an executive director. It is now left at her discretion how much time she spends on Magnolia to discharge her responsibilities to the company
There was no mention of a non-compete clause in Rita's 2011 Service Agreement but that was not needed as she was "full-time", however her new agreement contains the following states she is barred from owning >5% of any “cost bearing interest” in oil & gas wells, unless the board approves it. - This actually is now in direct competiiton with Magnolia. She operates in the same areas and most of Magnolia’s working interest are less than 5%.
It is interesting that Rita's new agreement explicitly bars her from owning >5% of in “cost bearing interests” in oil & gas wells. Technically Belle Trace - the sordid tale of which is related above - is a “mineral rights” business, though from a shareholder perspective this is surely semantics.
Belle Trace bought the mineral rights described above in February 2016, before the 31 March Commencement Date of RW’s new service agreement but most of its activities are covered by the "back dating" of the commencement date of the new agreement. Clearly since she was not "full time" in the Magnolia time machine contract the hope is that her activities at Bele Trace can be whitewashed.
I think not. This change of contract switcheroo is shameful. The attempt to cover up what went on at Belle Trace where Rita clearly put her own - sordid - interests ahead of those of shareholders is bad enough. The doubling up of her payoff if/when she gets fired is something Magnolia simply cannot afford - it is already in technical default on its $2.6 million loans - and is a clear case of Rita putting her own greed ahead of shareholder need.
If Cairn has an ounce of integrity it will be demanding the immediate sacking of Rita by her fellow directors (with a zero payoff as she would be leaving for what is gross misxconduct) and calling off the GM as it invites Ewan Ainsworth and Zak The Knife Phillips onto the Magnolia board. If Cairn will not act, it is off to AIM Regulation we go not to report Rita but to report the hapless Nomad and Jo Turner & James Cathie in particular for failing to eal with what is tantamount to theft from shareholders.
Chaps round at hapless Nomad Cairn of Cloudtag infamy ...you are on notice from the Sheriff of AIM, you have until noon today.
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