Thursday, March 10, 2011

Shareholders Invade Zenn Board of Directors

James E. Kofman
According to a late night Zenn Motor Company press release, "certain shareholders of the Company" have received cooperation from Zenn management to allow three new individuals to take seats on the Zenn Board of Directors.  Departing board members include Brian Cott, Stephen Rodgers & John R. Wallace.

Inbound board members include long time M&A expert James Kofman, well known Canadian TV personality & journalist Allan Gregg and Roger Hammock, a Zenn shareholder possessing over 1mil shares of Zenn stock.

Allan Gregg
What does this mean?  First of all, it means the new board of directors could seriously pummel almost any other board of directors in Canada.  On the business side,  Kofman has experience with "some of the largest M&A transactions and financings in Canada" according to the release.  Essentially, if you're planning to purchase Zenn Motor Company, you will now need to crawl on your hands and knees and politely relinquish your bid to Sir James Kofman.  As for Gregg, he currently sits on the Advisory Boards of General Motors Canada & Bank of Montreal.  Take a look at his interesting interview of Jeff Rubin back in 2009.   Actually, check out all of his interviews on youtube.  If you have the time and means, it probably wouldn't hurt to do a voice analysis to establish once and for all that he and I are not the same person.  As for Roger Hammock, what can I tell you other than that he owns over 1mil Zenn shares? Well, one thing I could tell you is I had a couple beers with him in Los Angeles last year and got a debrief on why he owns that many Zenn shares.  I can tell you that he & I had a lot of agreement on where EEStor is headed and how Zenn can maximize what it has.  More on that later.

Roger Hammock
So, again, what does all of this mean?  In my opinion, it means that a group of shareholders were not clear on where Zenn was headed and decided to take some action.  If you wish, you may say to yourself that they have taken over the company in virtue of gaining 3 seats on the board of directors.  Previously, I pointed out that Zenn appeared to be making some debatable decisions. If you look at some of the news tidbits out of the company for the past year, the impression that many had was that they were getting out of sync with their mission & EEStor.  When the LSV business was shuttered, Zenn put all their chips on EEStor.  But later, they announced some new technology initiative which they wouldn't fully describe but indicated was compatible with EEStor but could be used without EEStor. I know that this definitely upset some shareholders because  people were already losing patience in regard to not having an update on the EEStor front.  What this signaled to large shareholders was that Zenn was spending money and no one could really say where it was all headed.  The shareholders that I talked to agreed with me that things were getting a bit too insulated at Zenn.  So, from my perspective, this change of leadership has the potential to be a very good thing.

I've been doing a little bit of research about Zenn shareholders recently.  I'm not an expert nor would I sugggest this research is scientific. But I learned some interesting things.  First of all, there aren't very many institutional shareholders of Zenn: less than 10%.  In many cases, institutional ownership of a company exceeds 50% and sometimes it is as much as 90%.  In Zenn's case, 90% is held by individuals like you and me.  Furthermore, many similarly sized companies often have far fewer than 1000 shareholders.  In Zenn's case, there are well over 10,000.  I asked a money manager about this.  He said it would not be unusual for a company worth a billion dollars to have that many shareholders.  It is extremely rare for a company Zenn's size to have that many investors.  Ahem.

 I asked him why he thought more institutions don't own Zenn. He said for the most part, it is too controversial. His opinion was that the current stock price of Zenn reflects a 2% chance that EEStor is real.  Yet, he owns the stock personally but doesn't recommend it to his clients.  He knows others in his line of work in the same position--owning but not recommending. The upside is what is interesting. The possibility of losing it all combined with the strong lack of information surrounding the venture is what prevents it from being recommended.  If you look at the big picture, this is pretty much a common sense attitude--the sort of thing we've heard many times over the past couple of years following this story.   The good news is that if some of this information causes you to realize your investment in Zenn is a little bit nutty, there are at least 10,000 people equally nutty.

Disclosure: I have a long position in Zenn. Additionally,  I am crazier than you and portray myself on the Internet with a bag on my head: not a recommended trait of people from whom you should take financial or investment advice.

1 comment:

prometheusgonewild said...

While it is nice that Zenn has gotten some new leadership, if they cannot get the capacitors, it is a leadership selling air.
Not even compressed air. That you can sell. No, regular air, which no one is going to buy....
While I think the US government has forced the technology to got "grey" while the defense contractors play catchup; you do not think so.
If it has not gone grey, that means they are having difficulty getting it to work.
If that is the case, who cares what leadership is on the board?
In both cases Zenn is playing a waiting game. Whether the hold up it is political or technical, not a whole lot of leading to do....
I am not sure how long a company can stick around selling nothing but the possible future.....