Am back in Spain with time to muse.
Well either these guys have completely screwed up, or they decided last year that they were simply not going to allow an opportunist (and self confessed vulture) to grab more of the spoils than he was legally entitled to. The binary nature of our investment is entwined with the equally binary outcome of their actions.
That FRR was virtually insolvent operationally through most of 2016/17/18 is clear to all. Equally clear is that undisclosed vendors supported the company throughout this period without any form of security in place - to the tune of well over $20 million. And the available share headroom of 1.5 billion shares that was intended to provide at least part of that security still to this day appears to have been unused.
So despite these significant vendor debts the only people trying to force a case of insolvency are the buyers of distressed loan notes back in 2012/13 - secured for less than $5 million and almost certainly secured without consultation with or agreement from FRR.
At this point in time the binary interpretations are therefore pretty clear to me.
Either FRR has embarked on a last gasp ego driven and reckless course of action to retain ownership of an insolvent and debt ridden business. A course of action that we now know will almost certainly result in criminal proceedings should insolvency be proven over the next 12 months. This is of course possible - but in my experience such delusions and risks usually catch up with people long before the stage we have now reached.
Or FRR decided last year that - whilst they were operationally weak but increasingly asset rich - they were simply not going to allow an opportunist interloper to a) continue to veto strategic financing decisions, and b) to potentially acquire a significant holding in the company based on entirely negative behaviours. Hence the decisions to go down this necessary but hugely risky route.
If you believe the second option (which I do - albeit with great trepidation) you cannot adopt this route unless a) the other vendors back your approach at least in principle, and b) you have great belief that the asset both exists and can be monetised in the near future. So my interpretation is that there were actually only two real objectives here.
One - to get rid of Hope as a director, to allow the board to then make strategic decisions without fear of veto, and by any trick possible to prevent him securing any equity base whatsoever in the company.
Two - to buy the time that would allow another option to be adopted. And if this meant using every legal twist and tactic possible then so be it. Namely in some way create the time line that would allow the asset to be monetised.
This of course remains a very risky binary bet. But personally I will judge the competence of directors at the very end of the process - and not before. As I have said before this still could be the binary bet of recent times - but in this case the croupier has already long said “no more bets please”.
And one final point. All the way through the email trail revealed through the court papers there was only one reference that I can recall to BP. I can’t recall even one for BH. Yet these two great companies had long been working with FRR, had signed NDAs and as we know had operatives on the ground alongside FRR employees over extended time periods. Hope was informed of none of this until September last year. Which means that FRR were running two sets of dialogues. One that Hope was aware but not referring to the third party involvement in any way. And another set that nether we and nor Hope have seen - that would have covered in great detail the relationship with the third parties.
End game fast approaching in my view