TORONTO, Feb. 6, 2023
/CNW/ - Robert Williamson and
Talmage Adams ("Concerned
Shareholders") report an update to their discussions with
management of Zimtu Capital Corporation ("Zimtu" or "the Company"),
listed on the TSX Venture Exchange (TSXV: ZC).
The Concerned Shareholders state: "On January 23, we filed an Early Warning Report and
Press Release indicating our intention to engage constructively
with management to discuss value-enhancing strategies, including
active management of Zimtu's portfolio and shareholder capital
returns via accretive share repurchases.
"On January 25, two days later,
the Company announced a $1,000,000
private placement ("the Dilutive Placement") of Units consisting of
one Common Share at $0.07, and one
Full Warrant at $0.09, which
management proposes to issue to, among others, "close personal
friends and close business associates of directors and officers of
the Company".
"We subsequently presented to Zimtu Directors analysis
demonstrating that liquid securities held by Zimtu, with aggregate
value $2.6 million, could be disposed
in less than 1 month, with minimal market impact, and no adverse
change to the Company's business. Proceeds would suffice to
fund investments equal to Zimtu's average annual capital investment
during the past 5 years, with enough cash remaining to complete a
full annual Normal Course Issuer Bid in 2023. Therefore,
Zimtu currently has no need to raise equity.
"Management's proposal to issue 14,285,714 Shares plus
14,285,714 Warrants would result in a 109% increase in Zimtu's
fully-diluted shares outstanding, at a more than 80% discount to
Net Asset Value Per Share ("NAVPS"). Thereby, it would cause
an immediate decline of more than 40% in fully-diluted NAVPS,
permanently impairing the value of existing shareholders'
investment.
"Given Zimtu's lack of need for equity, and the conspicuous
timing of this extremely value-destructive transaction, the
Dilutive Placement would seem to serve no proper business
purpose.
"While we argue against issuing equity, if management is
determined to raise it, as an alternative to the Dilutive
Placement, we propose the following alternative transaction ("the
Offering"):
- Zimtu offer a maximum of 11,111,111 Units at $0.09, each consisting of one Common Share and no
Warrant.
- Zimtu extend this offer only to existing shareholders
("Shareholders").
- Each Shareholder be entitled to subscribe by specifying the
number of Units the Shareholder wishes to purchase, up to a maximum
of the fraction of 11,111,111 Units equal to the Shareholder's
percentage ownership of Common Shares immediately prior to the
Offering.
- Williamson and Adams, with management and BoD, would have to
agree to Backstop the Offering. This Backstop would be
conditional upon the appointment of Williamson and Adams as two of
four Directors of Zimtu. Williamson and Adams have provided
Zimtu proof of sufficient funds.
"The Offering would allow each Shareholder to maintain his/her
percentage interest in Zimtu. It therefore would be fair to
all existing Shareholders, while satisfying management's stated
need for capital for "new opportunities". Moreover, since
this transaction would be at a 29% premium to the price of the
Dilutive Placement, with no Warrants, the Offering would be 60%
less dilutive to the share capital of the Company, and 45% less
dilutive to the Company's NAVPS. Compared to the Dilutive
Placement, the Offering constitutes a superior offer.
"Alternatively, Zimtu may pursue a Rights Offering, which would
have similar economic effect, and be fair to all Zimtu
Shareholders. Such Rights Offering would be subject to the same
conditions as in (4) above."
SOURCE Talmage Adams