June 1, 2008 by Konner McDonnell
Posted in
Crystal Springs Land (CSL) and Crystal Spring Virtual Capital (CSV) were halted last week at the reqest of CEO Skip Oceanlane so that he could provide shareholders with details of proposed merger of these companies. Even though I hold around 500 shares of CSL stock, Oceanlane didn't send me the notecard outlining the merger. When a friend gave it to me yesterday, I had grave concerns. You can find CEO Oceanlane's unedited notecard here.
I wrote a letter to VSTEX listing the issues that concerned me the most. VSTEX would inform me hours later that they had formally approved of Oceanlane's merger since their current rules did not actually address mergers. They also noted that the issues I had raised "may be founded" and suggested that I raise them at the shareholder meeting.
While I considered attending, my previous conversations with Oceanlane usually resulted in him flying off the handle, even when I was trying to help him. More importantly, I've been fighting trench battles over issues that don't reflect a personal financial interest for the last four months. What is needed is for shareholders with significant interests to protect those interests. You can find the concers I raised here
I wish all parties involved in this matter the very best of luck.
Update
I received a log from the meeting, which you find here. Given the contents of the log, I feel little need to expand further, except to say that my concerns stand.
Please see Proposed CSL/CSV Merger 'Withdrawn' for further updates.
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VSTEX update
I would like to bring your attention to our latest (at the time of this writing) news item:
http://www.vstex.net/?p=103&id=142
Samantha Goldflake - Director
VSTEX Communication and Public Relations
http://www.vstex.net
Second update
http://www.vstex.net/?p=103&id=144
VSTEX Communication and Public Relations
http://www.vstex.net
Concerns regarding the Proposed CSL/CSV Proposed Merger - Update
My concerns are simple.
1) The converstion ratio proposed is 1:1 regardless of current trading levels, CSL .69 and CSV 1.04 and the IPO prices set less than a year ago of CSL .50 and CSV 1.00. Do these numbers not equal a 2:1 conversion ratio?
2) The Board of Directors are not the ones approving this merger, in the words of the CEO "[17:20] You: because I feel I have a right to vote like anyone else. And I realize that I have more than enough shares to approve the merger" http://www.csvc-sl.com/
3) The meeting should be open to the public, direct or indirect investors should be encouraged to attend meetings, period. The ejection and banning of Bogart Beck, CEO of CapEx, before the meeting started in my opinion was inappropriate and the commentary on the website associated with this are also inflamatory "It also should be noted that I banned Bogart Beck before the meeting started. He is not a shareholder, and was only going to be another disruption at the meeting. He was allegedly at the meeting because he owns stock in another company that owns stock in CSVC. Big deal. I want nothing to do with scammers like him. He should concentrate on returning the millions of Lindens he and Arbitrage Wise stole in the SLWallet scam before wasting his time to attend company meetings that want no part of him or SLCapex."
4) Lastly, where is the ethics here...start a new company, raise capital and then inflate the value of your already existing company to absorbe the new company...
-Scott Nestler, BOD CSV with 202k shares
My Advice to you, Scott
is take to your concerns, compare to the VSTEX listing rules, and write a compelling argument. That is what is needed. While I'm prone to trying to do those things, I've come to realize the line between investigative journalism and being the volunteer private investigator for Mr. & Mrs. Major Share Interest, Esq. If folks want me oversee their private interests, that's an employment route I might consider, but I've been getting the 'shill treatment' lately and that just isn't going to fly.
From what I've seen, you're a savvy one, so writing a compelling argument and doing the analysis might be second nature to you. Just be careful, people come to expect you to do it everytime, at their call.
Best,
km
I wish everyone invested luck as well.
I really don't see the involvement needed by VSTEX here. It shouldn't be VSTEX's role to bless or deny mergers. That really should be up to the shareholders and/or the board of directors acting as shareholder representatives (it's called oversight and apparently it's not done that well over at Crystal Springs). The notecards and meetings are peppered with I, I, I. I thought this. I felt this would be best. THE MERGER TERMS SHOULD BE COMPRISED BY AND AGREED TO BY BOTH BOARDS BEHIND CLOSED DOORS POINT BY POINT AND THEN OUTLINED AND PUT TO SHAREHOLDER COMMENT/VOTE BY BOTH SIDES BEFORE A AQU/MERGER IS ALLOWED. There are many things that are left unclear. I,I,I...In a perfect world...but then again this is not that perfect is it?
There's that hole in SL Corporate governance again. The CEO as the major holder. It gives the ability to act without regard to anyone else and strong arm because one holds the majority of a company. I guess it boils down to ethics and taking the interest of others to heart.
SL Public Companies: You need to realize and acknowledge you are taking other people's money to start your dream. If you want all the control then don't take others money. If you plan to do what you want without regard to others then don't take others money. Otherwise don't wonder why people are complaining, whining and wondering when you act irrationally and without regard to the public at large.
SL Exchanges: Here is another example of how an idea should have been thought through and initiated before an IPO was allowed.
Why couldn't this start up have been a sub project of CSL before IPO? This would have allowed Skip to see that it would be a failed or "needed duplication" effort and stopped it before anyone invested. People expected the company to last more than a month or two after the IPO completed and the CEO recieved over $7,000 USD for an idea that apparently didn't work out that well (or as well as he would have liked? WTF!).
What if this idea had started with a small CSL SPO, or even better, capital re-invested from CSL revenue? If successful it could have been spun off and scaled up with it's own IPO with a running track record. If not, then no love lost, drop the biz line and go about your way as one entity. That would have made much more sense. I hope the exchanges review IPO policies and stop allowing start ups or start putting caps on start up capital.
Finally regarding this situation, the stock price is what it is. He should not be allowed to artificially inflate a stock price to accomodate a nil premium merger. That's absurd by any terms. I agree, if anything, he should have CSL do a 2:1 conversion or pay a premium over current price and have CSL by CSV outright. This is not a clean transaction....
VSTEX comment
CSL/CSV CEO Skip Oceanlane wrote us on May 22, indicating his plans for a merger between the 2 companies. At the bottom of the mail, the following sentence: "So before I go public with all this, please let me know if you approve".
The day after we answered that we were still evaluating the request; at the same time we asked what was the point of helding a public vote, since the CEO could have had the merger approved anyways, due to the amount of shares held. We are well aware of the limitations and peculiarities of "SL public companies" and while a CEO has full control of every aspect of the company, we expect CEOs of our listed companies to reach general consensus over key issues like this one.
The same day we got the answer from Skip Oceanlane. Quoting from his email to us: "The point in voting for a merger resolution is for 1) Proper procedure 2) Better transparency 3) Ability to answer questions shareholders may have in both companies before the merger occurs."
Since then we've been evaluating our options. We reckon that in the Second Life metaverse a stock exchange is, or should expected to do some things that the "real life" counterpart shouldn't. This because there aren't regulatory bodies in SL, for example. We checked our rules twice, we evaluated the option of eventually adding new rules to address specific issues like company mergers.
On May 29, Skip Oceanlane wrote us since he was concerned about details of the merger leaking out (from our side, it would have been impossible anyways); quoting from his email: "placing a halt on both stocks will allow you the time necessary to review the topic, and for me to be protected". We complied with the request the same day (click here for the related news on the VSTEX website).
On June 1 we informed Oceanlane that he could proceed with the operation. Our "approval" was a confirmation that the proposal was not conflicting with any of our existing rules (it must be noted, mergers are not mentioned at all). Mergers should not be subject to the exchange approval anyways.
There has been a meeting already and we informed CEO Skip Oceanlane that the next one (where the voting will be finally held) will have to be in ful compliance with Section D of our listing rules.
At the time of the trading halt, CSV and CSL values were:
CSV: 1.04L$
CSL: 0.65L$
VSTEX held risk funds:
CSV 50,856.00 L$
CSL 40,357.00 L$
We do invite CSV and CSL shareholders to check Section D of our listing rules since it deals with their rights in company meetings.
Additional notes: all the quotes are from business emails and they are posted for the sake of clarity, transparency, disclosure; in good faith we believe they do not hinder anybody's privacy or reputation.
Disclosure: as personal assets of mine, I own 70,300 CSV shares; 70,000 bought during the IPO, 300 bought on the market at 0.90L$. Never sold a single share so far. On February 25 2008 I bought 9 (nine) CSL shares at 0.59L$, sold them on April 15 at 0.69L$.
Samantha Goldflake - Director
VSTEX Communication and Public Relations
http://www.vstex.net
All I have to say
beyond what I've already written is that Skip made it clear in the log that a "good" reason would be required to stop him. Skip once took my AVCIC report as a personal attack and used his tools as a VSTEX CEO to respond to my "inaccurate report." When Samantha Goldflake sent him an email(also on the AVCIC BLog) clarifying the meaning of my report, Skip left the announcement and did unmute me to further discuss the issue, which I would have liked, honestly.
My point is that this is just one indication that no argument will prevent Skip from doing what Skip wants to do.
However, the announcement by VSTEX clearly invites individuals to review Skip's proposal and the meeting logs for breaches to their company rules. If there was some breach on the road to this merger, it could be, at least, halted. At a glance, I found three.
My greatest concern is that halting this merger on any grounds would only find Skip trying to move exchanges. Honestly, he may try that following the merger. I've no idea.
Ask yourselves why merging these two companies would benefit Skip beyond those things he has said and take it from there. You might wish for VSTEX to provide a public record (google docs or so on) for information that cannot be obtained due to the trading halt.
Whatever you do, I again wish you luck. Should the merger take place, I hope very much that when I return my focus to journalism, Skip's actions between now and then will have proven my concerns to be unnecessary.
km
It must be noted, we did not
It must be noted, we did not invite or ask people to review Skip Oceanlane, his proposal, or the last meeting log for breaches of the rules, caveats or anything along that line. Not in a way that may suggest there's a witchunt or a run for any evidence of bad deeds.
We just believe that shareholders, investors and the general public should know the listing rules and double check any corporate announcement and action, as part of their due diligence. That should be standard practice.
Adhering to the rules protects everyone. The company, the CEO, directors, shareholders, investors and the general public. Whomever takes the time to review the rules and corporate announcements and actions, is helping himself and everyone else.
Hope this helps.
Samantha Goldflake - Director
VSTEX Communication and Public Relations
http://www.vstex.net
Noted.
I apologize for suggesting anything of the sort where VSTEX's position is concerned. However, I would still like to request that VSTEX provide data rendered unavailable by the trading halt.
Now, to clarify my own stance:
-I- strongly suggest investors run through every bit of information and compare it with the VSTEX rules. The impression I got from the meeting log is that shareholders were expected to convince CEO Oceanlane of why he should NOT merge instead of him convincing them why he SHOULD. At the same time, it's being called a "vote." To me, this is completely ass backwards. Investors need to be asking themselves why Ocealane mentioned the CSV IPO not meeting his expectations at the bottom of the proposal. Investors should be asking themselves if merging allows for anything not mentioned in the proposal(just off the top of my head, would delisting be easier?). They should be considering a good many things. Because I believe now that Oceanlane saw the merger coming at a time when CSV was still an IPO, I feel that shareholders need to try and anticipate what Skip Oceanlane is doing, what he plans to do, and why a merge is so important that he is introducing his own shares into the vote.
These are my opinions based on the level of scrutiny by which I would consider any situation like this. Despite my use of preious experience to explain why I think convincing Oceanlane to be a lost cause, these suggestions do not stem from a dislike of Oceanlane himself or any conjecture about past identities or any of that rubbish. I have learned to the past few months that it is very necessary to be hard sell and I suggest it to others in all decisions involving the virtual exchanges.
Now, I had supposedly said all I was going to say on this matter two comments ago. Time to rededicate my efforts where finality is concerned.
I just want to clarify my
I just want to clarify my previous statment. I wasn't saying that VSTEX shouldn't get involved in the merger, I only meant that it shouldn't have that burden of oversight. They have done a great job of being dynamic and responding to situations quite well as they arose.
Looking back on my comment - man I was angry and typing fast after reading that. It pisses me off that CEOs take money from others and then act as though those people don't exist. There is no I in a public company, there is only WE. WE need to make decisions, not I thought about it and this is whats going to happen.
Ethics..
There was NO reason to ban BO from the meeting. NONE. Its a sl PUBLIC company. Perhaps Bo might have had interest in investing, OR maybe he had some great ideas that would have added value to the abysmal proposed merger process. At any rate, there are some deep pockets that Bo can tap into, both financially and mentally. It seems a shame that he was treated this way publicly.
At any rate, I guess this type of situation is best left up to those with skin in the game that care what happens to this company. I don't have any shares in this company and now I am glad I followed instinct on this one. I am sure Skip did what he thought would be best, the whole thing just seems like a selfish move that could have been avoided with a little more planning and development.
Wow that's one heck of a read!
Wow that meeting is one heck of a read! Oceanlane critizes WSE and then acts in the same monopolistic unilaterial fashion as Luke hahahahaha. Then bashes SL Capex as a scam lol. NICE! Burn those bridges, who needs the top exchange with the broadest array of investors in the SL capital markets anyway? Did Bogart reject a past IPO application? Why the hate on him? What a way to treat your shareholders. Hold on to your hats people this ones going to be a bumpy rollercoaster ride. Those shares won't stay at .99 for long....