Finally a chance to sell you Vengrowth funds for a fraction of what you paid for them. Covington is buying the assets of the Vengrowth funds and rolling them into its Covington II fund. It's not an easy out though:
"Under the transaction, shareholders of the VenGrowth Funds will receive Class A shares of Covington II, at which point they will have three options:
• Continue to remain a shareholder of the new combined Covington II fund (certain funds’ shareholders will continue to have redemption restrictions)
• Roll-over the shares and receive new tax credits (current shares must have been held for at least 8 years)
• Redeem the shares for cash (subject to a redemption fee)"
I can't see anything in the press release about how much the redemption fee will be, but the Globe seems to suggest 40%. For those who held for 8 years watching their "investment" dwindle then were unable to sell. That's another harsh reminder of a decade old decision to buy these things. http://www.theglobeandmail.com/globe-in ... le1755851/
Yes, you are right, it is 40% to exit. Alternately you can take 10% a year free of charge for four years and the balance after the 4th anniversary of the transaction, which would turn my eight year hold into a thirteen year hold. My thinking is 60% of a bird in the hand beats 100% of whatever the value of said bird might be in four years.
The package sent to shareholders defends the charge on the grounds that a loan was secured in anticipation of redemptions. I quote: "Over the duration of the loan, this lender stands to earn approximately 15% per year (40% in total)" One would think CI could score a loan at a more attractive rate but I bought VenGrowth so what do I know?
And if you think it would be clever to roll over and redeem for a hit of only 25% plus DSC, CI has thought of that, too. In addition to claw-backs and DCS those who roll over will be subject to that 40% redemption charge should they redeem prior to maturity.
At this point anything is better than what I have been expecting to receive. Thus ends my LSIF adventure.
Big Bob wrote:
At this point anything is better than what I have been expecting to receive. Thus ends my LSIF adventure.
Are you sure about that? Did you notice the redemption clause that said if they run out of money (the loan was for $60 million), that redemptions would be limited to pro rata payouts? And no further information about how we would receive the remaining amount. I have no idea how much they owe in total or how many people will elect the pay-me-now option. No matter -- we also selected this option!
Whatever happens, it's already waaay better than that sorry Axis LSIF. We netted well under $300 for that misadventure.
Big Bob wrote:
At this point anything is better than what I have been expecting to receive. Thus ends my LSIF adventure.
Are you sure about that? Did you notice the redemption clause that said if they run out of money (the loan was for $60 million), that redemptions would be limited to pro rata payouts? And no further information about how we would receive the remaining amount. I have no idea how much they owe in total or how many people will elect the pay-me-now option. No matter -- we also selected this option!
Whatever happens, it's already waaay better than that sorry Axis LSIF. We netted well under $300 for that misadventure.
Good catch - no, I did not spot that. According to their site, VenGrowth II has assets of $154 million. If we all redeem, and I'm not sure I want to know someone who wouldn't, $60 million represents 40% of this amount. This is only taking into account the one fund. At a certain point I will be glad to have that thing off my statements but, as you suggest, that could be a long time coming and we get to pay management fees while we wait.
A futher thought - a number of people simply drop these big, complicated packges in the blue bin, often un-opened. I wonder if they are expecting a large number of no-shows who will end up owing Covington Class II shares.
Covington's proposal would drain $28.4 million from VenGrowth assets, and impose redemption fees of up to 40%.
<snip>
In a Nov. 11 letter accompanying the dissident proxy circular, GrowthWorks president David Levi said his firm has heard from a number of investment advisors who have expressed concerns about Covington's offer. "After looking at the terms of the proposed deal, we believe that a transaction involving one or more GrowthWorks managed funds can be put together that is significantly better for VenGrowth shareholders than the Covington proposal."
Covington's proposal would drain $28.4 million from VenGrowth assets, and impose redemption fees of up to 40%.
<snip>
In a Nov. 11 letter accompanying the dissident proxy circular, GrowthWorks president David Levi said his firm has heard from a number of investment advisors who have expressed concerns about Covington's offer. "After looking at the terms of the proposed deal, we believe that a transaction involving one or more GrowthWorks managed funds can be put together that is significantly better for VenGrowth shareholders than the Covington proposal."
So Monday Growthworks updated to provide a back-stop offer that promises to at least match the Covington offer, with the possibility of improving it. And they're saying they'll pay for $5 million of the termination costs, rather than taking that amount out of the fund itself.
I wrote:Covington quickly improved its offer only after GrowthWorks entered the fray, promising a sweeter bid. Among other things, GrowthWorks committed to directly paying $5 million of the more than $28 million in termination and other lump sum payments that will be triggered under the Covington deal.
On November 19, Covington stepped up and announced it would also absorb $5 million of the termination fees. I can’t help but wonder, however, what kind of deal VenGrowth funds’ boards could have negotiated if they actually invited all interested parties to the table. Purposely excluding a firm that is willing, able and interested in doing a deal seems inconsistent with the boards’ responsibility to make reasonable effort to maximize shareholder value.
The vote was 83% in favour for VenGrowth I, 81% in favour for VenGrowth II, 86% in favour for VenGrowth III, 83% in favour for VenGrowth ALSF, and 70% in favour for VenGrowth TI. There was more than a 600% increase in shareholder participation as compared to prior year's meetings. "Despite the overwhelming approval and voter turn- out, a dissident proxy solicitor intends to continue its efforts to negate this approval. Although there are still things to be done, we are confident that the transaction will close." says Allen Lupyrypa, Managing General Partner, VenGrowth.
Added: Note that 2/3rds support was required for each fund so one of them was close.
GrowthWorks also received confirmation from the proxy tabulator that the fax line published in the VenGrowth Funds' shareholder materials was largely inaccessible during the final two days of voting, which prevented an unknown number of votes from being lodged. Late in the process, VenGrowth issued instructions about how dealer/nominee voting could be conducted which also impeded the vote. These kinds of issues go the heart of the fairness of the process. Once GrowthWorks has had an opportunity to inspect the proxies, it will decide on next steps.
Whether it was in the shareholder or a broader context, I thought I'd read stuff recently regarding how votes are notoriously miscounted. Am I dreaming here or did I actually see that? While I can't recall any specifics, the topic jumped immediately to mind as I've followed this issue.
Not only that, but a hearing on the plan of arrangement could theoretically cancel the transaction outright and send it back for another vote, after Vengrowth puts out another circular with better disclosure.
Received a growthworks proxy-type package today. Does sound like they're prepared to make a better offer but the paper they want signed is full of alarming wordage "power of attorney" etc. and seems overly broad.
Well I received the Growthworks proposal as well, now it's time to decide which crook will better serve the Vengrowth investors.
I don't think it really matters after the $28.4 million in termination and other fees that would be drained from the assets and their
monthly management fees there isn't going to be allot left for shareholders either way.
Haven't decided yet what to do, don't trust the existing management at Vengrowth as the deal they will recommend will be one that lines
their pockets at the expense of shareholders.
Would like to hear what others will be doing as well.
Received a growthworks proxy-type package today. Does sound like they're prepared to make a better offer but the paper they want signed is full of alarming wordage "power of attorney" etc. and seems overly broad.
Growthworks has requested you sign a yellow colored agreement page and return it to them by 08 April 2011.
Background Information:
Last fall Vengrowth agreed to be bought by Covington Funds. Apparently there were some significant insider payments / costs not disclosed to shareholders. Growthworks filed a lawsuit. The court ruled in December 2010 that the deal with Covington was NOT in the best interests of shareholders. The deal was terminated.
NOTE: Under the Covington deal:
if you redeemed your shares upon closing, there would be a 40% fee charged to you. Growthworks was proposing a 30% fee.
Vengrowth has since reopened the bidding process again. All bids are being reviewed by independent financial and legal advisors to the Vengrowth board. At this time, no decision or recommendation has been made.
Growthworks has decided to “jump the queue” of the independent review process and any Vengrowth board recommendation by going direct to shareholders (you). The agreement they are asking you to sign is in fact providing Growthworks with your Power of Attorney. You will relinquish your rights as a shareholder if you sign.
Other potential bidders have said VenGrowth's shareholders would have been better served had a completely independent committee been set up. While VenGrowth can claim that under the rules the four are independent of management, the four, in various ways, have had connections to VenGrowth.
After their first attempt with Covington trying to rape the share holders, do you think these independent managers, whom all have had connections
to Vengrowth, can act in the share holders best interest?
I for one am going to sign the Growthworks form, if only as a protest vote.
Vengrowth have shown themselves to be very adept at losing me money and charging me for it. Their deal with Covington was rife with conflict of interest. It's time to invoke the Costanza rule. Since every decision the Vengrowth managers make turns out to be wrong, the right decision must be to do the opposite of what they say.
Yup, I'm leaning that way myself. Can't be any worse. And just think of the money that will be saved not having to send out
all the garbage to shareholders and monthly MER's that are reducing all of the funds to mere pennies on the dollar.
It's quite revealing -- and quite disconcerting -- as you read through the documents going back and forth -- with kettles calling the pots black and vice versa -- to see how undercapitalized both VenGrowth and GrowthWorks were/are -- in other words, not capable of making follow-on investments. Not the best light to shed on the VC industry.
So what's at stake? Perhaps a bid for management fees, rather than coaching a company through to an IPO or a takeover/acquisition. The returns on the portfolio companies, if they materialize, will be reaped by the other VC investors that both firms co-invested with, as VenGrowth and/or GrowthWorks shop positions at a considerable discount to firms with deeper pockets in order to return some fraction of invested money to shareholders.
Does it really matter anymore? They've bled our holdings down to $1105, as of today. In the meantime, they're both spending more money on mailings to everyone, not to mention the legal expenses. By the time this is all over, what will be left?
Giving GW power of attorney shouldn’t be taken lightly. And it’s impossible to know who is more trustworthy, so the decision is largely based on gut instinct. Even though I’m not crazy about their offer, my guts tells me that signing and sending GW’s support agreement will be better than allowing VG to have full control of the process.
SILOG, you raise the issue of senseless spending...
SoninlawofGus wrote:Does it really matter anymore? They've bled our holdings down to $1105, as of today. In the meantime, they're both spending more money on mailings to everyone, not to mention the legal expenses. By the time this is all over, what will be left?
Well, it gets worse - on principle not the amount of dollars. As Wellington Financial LP's Mark McQueen has kindly pointed out, VenGrowth is sponsoring its golf tournament. This occurs while the firm is winding up its business and the event will take place just weeks before wind-up (or wind-down or however that goes). And take a shot in the dark as to where that money comes from to pay for sponsorship.
DanH wrote:
Well, it gets worse - on principle not the amount of dollars. As Wellington Financial LP's Mark McQueen has kindly pointed out, VenGrowth is sponsoring its golf tournament. This occurs while the firm is winding up its business and the event will take place just weeks before wind-up (or wind-down or however that goes). And take a shot in the dark as to where that money comes from to pay for sponsorship.
Interesting, but did you notice that GrowthWorks is a sponsor too!