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Pinetree Capital Ltd. CEO Sheldon Inwentash is Out in Default-induced Board Shakeout
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In what constitutes the end of an era for Pinetree Capital (TSE:PNP) (OTCMKTS:PNPPF), Sheldon Inwentash has agreed to resign the CEO and Chairman of the Board positions, effectively ending his participation in the company he took over in 1992, when he created what went on to become one of Canada’s most prolific merchant banks primarily in the Natural Resource sector. The company itself was founded in 1962.
The resignation comes as part of an agreement to head off Pinetree’s collapse into receivership, as it is currently in default on certain covenants of an outstanding convertible debenture with a principle value of $55 million.
According to the company’s press release earlier today,
“The company and the Supporting Debentureholders, who collectively hold in excess of $39 million principal amount of the Debentures, representing over 71% of the $54.822 million principal amount of the Debentures outstanding, have executed a term sheet which provides, subject to the satisfaction of certain conditions, that the Supporting Debentureholders will not, until the earlier of the execution of a forbearance agreement (the “Forbearance Agreement”) and January 30, 2015, exercise any rights or remedies that they may have under the Indenture or otherwise in respect of the existing Event of Default, and will direct the trustee to cancel any declaration that may be made by the trustee that the principal of and interest on the Debentures is due and payable in connection with the Event of Default.”
In connection with the execution of the Forbearance Agreement, each of Messrs. Roger Rai, Sheldon Inwentash and Marshall Auerback will resign from the board of directors of the company. As well, Mr. Inwentash will resign as Chairman and CEO of the company. Richard Patricio, the company’s Vice-President, Corporate and Legal Affairs will assume the responsibilities of Interim CEO.”
Pinetree Capital CEO Sheldon Inwentash, who is forced to resign from the company he ran for the last 25 years, paid himself a $32 million bonus in the same year the company's share price lost 66%.
Pinetree Capital CEO Sheldon Inwentash, who is forced to resign from the company he ran for the last 25 years, paid himself a $32 million bonus in the same year the company’s share price lost 66%.
The news comes as a bit of a shock to those not intimately familiar with the operation of the company. Shares in Pinetree were down to a 52-week low of $0.09 after years of weak resource markets and excessive payouts to Inwentash caused stakeholders to question management’s integrity, and planted the seed of the revolt resulting in today’s termination of Inwentash.
In 2011, Inwentash paid himself a $1 million salary and a $32 million bonus. The self-directed largesse was jaw-dropping at the time, as Pinetree in 2011 lost 66% of its value, dropping from $4.17 a share in January 2011 to $1.41 at the end of December 2011. In 2007, the stock touched a high of $16.15 a share.
While there is no doubt that the collapse of natural resource investing in Canada since 2011 played a major part in Pinetree’s current predicament, it is hard to overlook the behaviour of a CEO who routinely put his interests above those of his investors once trouble began.
Richard Patricio, a long time Inwentash associate and the firm’s in-house legal counsel, takes over as Interim CEO.
James West
Editor and Publisher