Takota Interview On Being An Occasional "Active" Investor!
Takota Asset Management had an issue with Sherritt International’s [TSX:S] efforts to raise capital to firm up its balance sheet, co-founder W. Scott Leckie told Activistmonitor.
"It was poor judgement," he said. "Their recent decision to raise equity at current share prices was an example of poor capital allocation where they diluted shareholders of 20% of their interests in exchange for a modest reduction in debt of about 10%."
In May 2017, Sherritt entered into aggreement with Sumitomo and Korea Resources to eliminate USD 1.4bn in debt, in exchange for part of its stake in the Ambatvy nickel mine in Madagascar. Sherritt retains a 12% stake and operates the mine until at least 2024.
Leckie is pushing for “management to make good capital allocation decisions” so shareholders can “fully benefit” from the top end of the nickel/cobalt price recovery and the new demand for batteries for electric cars and grid storage.
That criticism comes on the heels of Sherritt management successfully negotiating to reduce debt owed to financial partners in the Ambatovy nickel mine in exchange for Sherritt’s reduced stake in the mine. Leckie praised that effort but said the issue of shares is a problem.
He’s been known to press management of companies he’s invested with in the past. It starts with public letters to the board and with discussions with the CEO and investors. Leckie’s even blogged about his concerns. Attending an annual meeting is usually the next step. He wouldn’t say whether he’d be attending Sherritt’s spring meeting.
In regard to Sherritt, Leckie said “I have had a complex relationship with the company” over the 27 years he’s been involved. “I have at times undertaken initiatives to support the company (filing affidavit on their behalf in a legal challenge with Deutche Bank) but at other times I’ve been critical.”
More of an active than activist investor
Leckie sees himself more as an active investor as opposed to being an “activist.”
“Once you’ve done the initial work of researching a business, and purchased your investment you keep tabs on it but let a competent management overseen by a strong board run it, grow it and create value for shareholders,” he said. “When there’s something that stands in the way or threatens the value, that’s when we’ve tended to become more vocal. That’s where you’re picking up this acti