Investors urged to spurn Paladin share placement
Despite the $88 million placement taking effect in early August, shareholders will be asked to approve it retrospectively at Paladin's annual meeting on November 21.
Shareholder approval would allow Paladin to make further share placements later this year, but rejection would prohibit any more raisings, and duly close off one of the company's swiftest methods of raising cash. Proxy adviser ISS has recommended that shareholders vote against the placement on the grounds that most of them were denied the opportunity to participate, with the placement sold mostly to large institutions.
Paladin shares were fetching $1 prior to the placement being announced in early August. The stock immediately slipped to 72¢.
The stock has since slipped further, and was trading at 40¢ on Friday.
ISS head of research Dr Ulysses Chioatto said shareholders should not ratify the controversial placement.
"The placement was very dilutive to existing shareholders and, more importantly, they never got a chance to participate, so that was quite discriminatory and definitely not good governance practice," he said.
"It's really holding the current shareholders with some significant disdain by not allowing them to be involved."
While a negative vote will not overturn the placement, he said it could still prove uncomfortable for Paladin executives.
"This is going to be quite problematic if Paladin does not receive shareholder approval," he said. "There is a range of different actions that are open to shareholders if they don't approve this placement retrospectively, so there is no clear answer as to what could be done next."
Paladin chairman Rick Crabb said he was "surprised" by the recommendation, and said ISS had failed to appreciate the difficult context in which the share placement was made.
Paladin is listed in both Australia and Canada, and Mr Crabb said a broader rights issue in a time of falling uranium prices would have been lengthy and complicated, and might have created uncertainty about the company's ability to raise money.
"We could have had a downward spiral in price, so it was a properly considered risk-management strategy we followed," he said.
Other proxy advisers such as CGI Glass Lewis and Ownership Matters are expected to publish their reports on Paladin next week.
Frequently Asked Questions about this Article…
Shareholders are being urged to reject the Paladin Energy share placement because it has significantly diluted the value of existing shares and most shareholders were not given the opportunity to participate. This has been deemed discriminatory and not in line with good governance practices.
Shareholders are being urged to reject the share placement because it has significantly diluted the value of their shares and most were not given the opportunity to participate. This has been deemed discriminatory and poor governance by proxy adviser ISS.
The share placement has had a negative impact on Paladin Energy's stock price. Before the announcement, shares were trading at $1, but they dropped to 72 cents immediately after and further declined to 40 cents.
The share placement caused Paladin Energy's stock price to drop from $1 to 72 cents immediately after the announcement. The stock has since fallen further, trading at 40 cents.
If shareholders reject the share placement, it would prohibit Paladin from making further share placements this year, closing off a quick method of raising cash. Although a negative vote won't overturn the placement, it could create discomfort for Paladin executives.
If shareholders reject the share placement, it would prohibit Paladin from making further share placements this year, closing off a quick method of raising cash. Although a negative vote won't overturn the placement, it could create discomfort for Paladin executives.
ISS recommends voting against the share placement because it was highly dilutive to existing shareholders and they were not allowed to participate, which is seen as discriminatory and poor governance.
ISS recommended voting against the share placement because it was highly dilutive to existing shareholders and they were not allowed to participate, which is seen as discriminatory and poor governance.
If the share placement is not approved, Paladin Energy may face significant challenges as it would lose a swift method of raising cash. This could lead to uncertainty about the company's financial stability and future fundraising capabilities.
If the share placement is not approved, Paladin Energy may face challenges in raising cash quickly in the future. It could also lead to shareholder actions, although the exact consequences are uncertain.
Paladin Energy's chairman, Rick Crabb, stated that the share placement was a risk-management strategy in response to falling uranium prices. He argued that a broader rights issue would have been lengthy, complicated, and could have created uncertainty about the company's ability to raise funds.
Paladin Energy's chairman, Rick Crabb, expressed surprise at the recommendation against the share placement. He argued that the placement was a necessary risk-management strategy given the difficult context of falling uranium prices.
If the share placement is approved, Paladin Energy would be able to make further share placements, providing a quick method to raise funds. However, if rejected, it would limit the company's ability to raise cash swiftly.
Paladin Energy considered a broader rights issue, but it was deemed too lengthy and complicated, especially during a time of falling uranium prices. This could have created uncertainty about the company's ability to raise money.
Other proxy advisers, such as CGI Glass Lewis and Ownership Matters, are expected to publish their reports on Paladin Energy soon. Their views will provide additional insights into the share placement and its implications for shareholders.
Proxy advisers like ISS provide recommendations to shareholders on how to vote regarding the share placement. Their analysis and recommendations can influence shareholder decisions and highlight governance concerns.
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