In what can only be labeled as one of the most tone deaf and literally self serving deals of the year, Prospera Energy (PEI.V), which we’ve chronicled here plenty as a giant bad debt on wheels, has announced an ‘aquisition’ of White Tundra Petroelum, otherwise known as ‘the chairman’s problem.’
For the uninitiated, Prospera owes.. someone.. a total of $14,500,000 in debt, which would be 85% of its market cap, and that debt carries an interest rate of 12%, and is due within two years. They’ve been adding millions more to that debt refinancing it and punting it down the road.
So announcing an acquisition is a little out of character.
Prospera says of the deal, “The acquisition strengthens PEI’s base production and provides numerous high-impact reactivation opportunities,” which might provoke some to wonder out loud why they’d buy something that needs ‘reactivating’ in the first place, given they’ve spent four years trying to reactivate what they have, to limited success.
The deal will send around half a million bucks worth of PEI shares to White Tundra shareholders, and will assume $695k in WTP debt.
More debt?
Inactive wells?
WHY
Shubham Garg serves as Prospera’s Chairman of the Board, the CEO of [White Tundra Petroleum], and is a shareholder of WTP
WUT?
Let’s repeat it for those who may have missed it: A company with so much debt it’s technically insolvent has ADDED the chairman’s debt., a sweet $695,000, to its own debt, in return for some inactive wells.
Adding more debt to the books seems like a bananas move, especially considering the asset is owned by the chairman, but hey, you’ll be happy to learn it’s all above board.
..the related party director has recused himself from all board discussions including the acquisition’s deal structure, valuation, and decisions in relation to this transaction.
Oh, well that’s good I guess.
I’m almost certain the board of the company he chairs considered all conflicts of interest when they decided to have their heavily indebted company, that has been defaulting on service provider contracts, buy the chairman’s dogshit.
But, also, maybe the whole fucking crew is just corrupt and taking a likely upcoming insolvency as a chance to get their buddy clean.
A lot of the time, market shitbags don’t get to wear their shitbagginess around on their next deal – instead, they become a quickly forgotten name at the bottom of a press release and move on to their next scam without personal cost, so let’s make sure you know who Shubham Garg is BEFORE Prospera goes tits to the wind.
This is chairman Shubh.
His company website for White Tundra Investments is easy to find, but you won’t see anything on it but a place to put your password.
That and his buried ‘legal’ page would indicate he has a private section of the site where he’s sharing info away from regulatory eyes. He likes to position himself as a global oil and gas commentator on Youtube and Twitter, which jibes with that, and he likes to do interviews in his truck and show off his toys.
If Fort Mac was a sentient human being, it would be Shubhan Garg. The dude is a stereotype with legs. I expect he runs on diesel.
THINGS I WANT TO KNOW:
- Who does White Tundra owe its debt to? Is it Shubham Garg?
- Who are the shareholders of White Tundra, other than Shubham Garg? Are there any?
- How much of Prospera’s massive debt was owned by Shubham Garg before this deal was announced?
- Is the recent debt refinancing Prospera announced debt that is owed to Shubham Garg, and was the company forced to buy his company and its debt as a quid pro quo on that refinancing?
- Has anyone run a third party assessment on the value of White Tundra, to ensure PEI isn’t getting robbed?
I feel like shareholders are owed answers to these questions, but hey now, don’t get all conspiracy theorist on me because if you’re concerned this ‘related party transaction’ is some straight market manipulation bullshit that leaves PEI shareholders holding the bag for The Gargler’s errors, the board has news for you.
The company says it has strengthened its corporate governance policies, and, “this highlights Prospera’s renewed commitment to enhanced transparency, public disclosure, and governance.”
That’s all cool and all but, if it were true, the company would be ‘transparently’ press releasing that it is currently in mediation with several debtors and appears headed to court in relation to some of those debts. Personally, I’m considering joining them, as Prospera infamously walked out on $30,000 it owes me for services rendered, for which it gave me a 24 hr deadline to accept $1800, while also deciding our contract was null and void.
This while increasing their debt and missing their production targets.
Now, why would the Prospera board, other than out of rank fealty to their Chair, agree to take on his ‘unactivated wells’ and his debt?
Maybe because of this:
Prospera is pleased to announce that it has reached a settlement agreement with its convertible debt holders to address the upcoming maturity of its $1,500,000 convertible debt, along with accrued interest of $559,374.82 as of the note maturity date on March 26th, 2025.
Could it be that the chairman owns, or has some sway, over the debt PEI couldn’t cover the interest payments on, and gave the company no choice but to add his own company’s debt in return for not calling it in and blowing everything up?
I mean, maybe that’s not what happened, but with all those “strengthened its corporate governance policies,” and all that transparency, you’d think they’d tell investors who owns that debt. And who else, if anyone, is a shareholder of White Tundra Petreoleum.
ALSO, PROBABLY TOTALLY UNRELATED BUT MAYBE NOT:
The company has decided to grant underwater warrant holders another year to make money off that paper.
I wonder how many of those The Gargler owns?
Number of warrants: 15.33 million
Original expiry date of warrants: Feb. 14, 2025
New expiry date of warrants: Feb. 14, 2026
Original exercise price of warrants: nine cents
New exercise price of warrants: six cents
New acceleration provision of warrants: 7.5 cents
Considering a lot of the debt that Prospera owes is convertible at 5c per share, and that the debt is almost the equivalent of the current value of the company, the stock hitting 7.5c for an extended period might just be the biggest pipedream since the cannabis industry.
CORPORATE UPDATES FOR EVERYONE:
Prospera has committed to keeping investors updated on field shenanigans, but in practice they like to bury the shareholder with text that describes bad things as good things, a practice known in legal circles as burying your opponent in evidence.
Thankfully, there’s so much bad around Prospera that you can pick out some choice stuff without digging too hard.
Some choice sentences in the wall of information include:
- Prospera has successfully negotiated structured payment plans and arrangements with its top 50 vendors ranked by outstanding accounts payable arrears [read: bailed on their contracts].
- The company continues to make significant strides in addressing MER and AER non-compliances including spill pile clean-ups.. [so cool that you’re fixing non-compliances]
- The pipeline cutout failure analysis and third-party engineering review for both Hearts Hill pipeline failures have been completed and shared with the appropriate regulatory bodies.
- The company has completed extensive reviews of the nine horizontal wells drilled in 2023 in the Cuthbert pool, as only three of the wells are performing to expectations.
- By reactivating wells instead of abandoning them, the Corporation is transforming liabilities into revenue-generating assets, in turn, increasing cash flow rather than incurring abandonment costs. [Those must really be some great assets if it was a coin flip whether or not to reactivate them]
My take:
I’m conflicted up and down as this company was one I worked for, and it was the most dysfunctional experience I’ve had with any resource company in years. From weeks waiting for them to answer emails, a CEO that was missing in action more often than not, written work edited over and over to make it read like a 14-year-old prepped it, promises from the IR team that they loved the work but the CEO was “a bit of a problem,”, and ultimately a promise to ‘buy out’ the remainder of the contract debt, which turned into the company refusing to pay what it owed, PEI under Chairman Garg is not cleaning itself up transparently, it’s a den of thieves giving the treasury to the people on the board it owes money to that it seemingly can’t pay.
“Negotiating arrangements” with service providers, while actually stiffing them on what you owe, is some bullshit corporate terminology that should be translated by shareholders and potential investorts as “these guys are out of money, and the people they owe money to have two options: sue them in court, or take pennies on the dollar.”
Except for Chairman Garg. For him, and whoever holds all that company destroying debt, nothing but fat deals, cheap shares, extended warrants, and now acquisitions as they punt what amounts to unpayable debt down the road long enough to hope gormless investors might come in and lose their retirement packages.
Understand, when Prospera cant pay its debts (that used to belong to the chairman) and ‘the debt holders’ convert that debt into 5c stock and leave y’all with a tiny percentage of what’s left, they’ll sell off the assets as scrap and you’ll be at zero.
As things stand, that 12% interest on $14.5m annually is $1.74 million. Before a dollar goes into treasury, it’s going there.
And we can only guess whos bank account that is, right Shubhy?
— Chris Parry
FULL DISCLOSURE: Come on, sue me. Let’s ‘discovery’ the shit out of this thing.
