Thread by @PerpetualValue

MJ Hudson, #MJH raising minimum of 9.5m equity.

Impressive company, however, the management has really stuffed the shareholders with their LTIP

The Company was admitted to AIM on 12 Dec 2019 @ 57p. Placing at 30p. A loss of 47%
However, management would get 10m, 19,5% dilution

In the accounts to Dec 2021, so far only 4.2m of cumulative charges are taken for the share options and LTIP, but now suddenly 10m would have been handed out to management.

They have shifted these from the LT liabilities towards 'share-based payment reserve'. Therefore, you wouldn't recognize the liability on the balance sheet as equity holder. Also the estimation of these charges have been way too low as we recognize now.

Also in the diluted EPS calculations this huge potential dilution was nowhere to be found. Not a sign of the potential dilution by the sneakily defined LTIP.

So, the potential dilution is not to be found as a liability on the balance sheet and not as potential dilution for EPS.

How can the management possibly get a 19,5% equity stake when the share price has almost halved?

Well, geniously design your LTIP, so that you almost win.

The management gets rewarded for 'Aggregate Gain', huh, but they Company lost almost 50% of value?

Well, there are two parts of the 'Aggregate Gain'
The TSR gain, which is obviously not reached.
And the adjusted EBITDA gain.

For the adjusted EBITDA gain a minimum of 4,74m was chosen.

The adjusted EBITDA gain is calculated as the gain in value of the Company implied by the growth in adjusted EBITDA over 3y multiplied by the market capitalisation immediately following admission.

That's easy, that market capitalisation was almost 100m at IPO.

Just a growth of 10% would give the total pay-out of 10m (10% of 100m). No matter what the share price would have done.
Organic revenue growth was 33% the 3y preceding IPO.
Also, the Company just raised money that it could use to do acquisitions.
Hardly ambitious.

In the Admission Document they also showed the 'Maximum award under the LTIP', which was supposedly 9,2 million.

Now the LTIP that would have been 10m @ 30p would have been 33,3m shares dilution (19,5%).

I feel tricked and I've mentioned this to management.
For the equity raise management seems to have agreed to reduce the 10m LTIP to a 7m LTIP.

Still, this has been terrible corporate governance and outside shareholders have been in transparently hugely diluted.

Shareholders should make sure that the management doesn't do this again in the future.

@Glasshalfull1 @Carcosa61

*so that you almost always win*

actually they have not reduced at all, they have just deferred 30% of the LTIP with one year.

And as an extra, they have given themselves one extra year to reach the TSR part!!!

What a bunch of con men.

investegate.co.uk/mj-hudson-grou…

#MJH

https://twitter.com/PerpetualValue/status/1557429661088419840

Also, the Board of Directors contains the CEO, the COO, the CFO, a Partner and a MD from MJ Hudson. Out of a total of 8 directors, 5 are actually working at Executive Positions at MJ Hudson. A majority, of Non-independent Directors is not a sign of good Corporate Governance.