It’s probably not an exact relationship but as a general rule it seems the smaller the company the larger the governance issues.

Consider Eco Oro Minerals, whose market cap is $60 million.

It is the subject of a proxy battle — the showdown is set for April 25 — being led by Courtenay Wolfe and Harrington Global Opportunities Fund who claim “the time has come to bring an end to the culture of Board self-enrichment.”

The company, which had a mere to $31,000 in the bank before it inked a financing package with Tenor Capital Management last summer, is also the subject of a shareholder oppression action filed by a long-time shareholder.

And Tuesday we found out that the company, whose value will be ultimately determined by the outcome of an arbitration hearing with the Colombian government, is the subject of an OSC hearing. (The financing package allowed Eco Oro to fund the arbitration while giving the new shareholders an overwhelming share of the gross proceeds.)

The April 19 OSC hearing, initiated by Wolfe and Harrington, concerns the issuance of 10.6 million shares to four shareholders who bought convertible notes last year. Those shares were issued to relatively new shareholders a week before the record date for the upcoming special shareholder meeting.

In her circular, Wolfe said the conversion represented “a desperate and unacceptable attempt to manipulate the voting process and to further entrench a board which has no support from the minority shareholders.” In other words having more shares in friendly hands increases the chances of the incumbent board retaining their positions.

At the time, Eco Oro said the “partial conversion,” allowed it “to extinguish part of the Company’s outstanding debt obligations at a share price that protects future shareholder value.”

The Wolfe group also filed a petition with the Supreme Court of British Columbia seeking the cancellation of the share conversion — or excluding the votes attached to the new shares from the election of directors.

Meal-kit providers

The timeline for the country’s first meal-kit provider to become a public company continues to narrow.

The latest step in the path for Montreal-based Goodfood Market Inc. occurred when investors anted up $21 million by way of subscription receipts. In time, the receipts will convert to common shares on a one-for-one basis.

GMP Securities, National Bank Financial and Cormark Securities rounded up the investors with the proceeds being earmarked to further Goodfood’s business and for general working capital purposes.

Meantime the funds will be placed in escrow pending the closing of a transaction with Mira VII Acquisition Corp. a capital pool company. For Mira, the transaction — announced about a month back — will count as its qualifying transaction. As part of that process of going public by way of reverse transaction, the norm tends to be for the private company to raise equity capital.

Goodfood’s path to become public is occurring at the same time as U.S.-based meal-kit companies are pursuing a similar strategy.

According to reports, two U.S. companies, Blue Apron, the largest in the industry, and Sun Basket, have hired investment bankers to lead IPO’s later this year. Blue Apron, formed in 2012 and which ships eight million meals a month, retained Goldman Sachs, Morgan Stanley and Citigroup to lead the offering. Reports indicate it generates US$750 million in revenue and could be worth US$2 billion.

Sun Basket, Inc. formed in 2014 and which is estimated to be worth US$500 million — US$1 billion, has hired Bank of America Corp. and Jefferies LLC for its IPO.

Financial Post
bcritchley@postmedia.com