RE: I can't take this anymore.24 Jan 2019 17:39
Hi Sam, I think your reaction is exactly the reaction Krupa is trying to achieve among investors in EMH: fear. Let me explain my thoughts, which I hope are shared by others:
The first thing to understand is that Krupa's letter is actually addressing shareholders of EMH, like you and me, and maybe significant investors such as Cadence, rather than addressing the board. Normally, communication between institutional investors and boards are done privately – in some cases they have a seat on the board – but normally they’ll have a direct line with senior management. Look at the letter: "Dear Board Members and Fellow Shareholders".
Secondly, Krupa is being disingenuous - his fund cannot take over Geomet / EMH at its current valuation for a variety of reasons, not least of which being that his fund is too small; yes, even if it’s true that his fund has $2bn AUM, which he proudly states in the letter. No way will his fund have the liquidity (incl. debt) to buy Geomet at this stage, but he may have a shot if the board is pushed to accept a (very) low ball offer. The more fear he instils in EMH investors, the greater the pressure on the board will be to sell out on the (very) cheap. He points to the threat of expropriation; he even attaches an article in the press that suggests this by quoting Babis’ government: “the right to mine […] is still open” i.e. EMH has no priority.
But his obstacle isn't only valuation, it's also the ownership structure, which he defines as complex and opaque. Actually, the ownership structure is very transparent, and is listed on two stock exchanges, both of which are far more transparent than the Czech stock market, and one of which (AIM) is still in the EU! Even with the hardest of BREXITs will an AIM-listed company attract more investment than a Czech-listed one. His point on this is totally ludicrous.
However, this perfectly correct and transparent structure makes it harder for Krupa to buy Geomet /EMH, so he would rather like EMH to be served on a plate, in his local market, under his and his friends’ “regulations”. Moving to CZ would also guarantee him fewer opposing bids from other more serious institutions.
And from what I have read, Krupa’s ambition/ego cannot allow him to miss out on this opportunity, which is probably the largest opportunity of his life and which is sitting at his doorstep. He’s trying to rattle us so that we put pressure on the board to eventually sell out at any price to avoid losing it all via expropriation, which is what these people would love to do but can’t under any law.
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