Poseidon wins protection from creditors
Investors in one-time market darling Poseidon Concepts Corp. are unlikely to recover any value despite the company winning temporary court protection from creditors, a Calgary analyst says.
On Wednesday, the Calgary oilfield fluid-handling company that once had a market value of $1.3 billion announced it had been granted a Court of Queen’s Bench order under the Companies’ Creditors Arrangement Act.
It was Poseidon’s first official word since Feb. 26, when it announced two executives had quit, and Feb. 20, when it admitted it was technically in violation of its covenants on some $55 million in debt.
A week earlier, it said it would have to restate its financial reports for the first three-quarters of 2012, an admission that led to an Alberta Securities Commission cease trade order and a halt in stock market trading.
The company said a committee had found that $95 million to $106 million of its $148 million in revenue for the three-quarters ended Sept. 30 should not have been recorded as such — and that $94 million to $102 million of its $126-million accounts receivable also should not have been recorded.
Mike Mazar of BMO Capital Markets, one of several Calgary analysts who have dropped coverage of Poseidon since then, said the company’s shares are worthless.
“The stock is for all intents and purposes at zero now,” he said. “My guess would be that anyone who is invested in this stock has at least mentally written off their entire investment.”
He added Poseidon’s creditors are also many steps away from realizing any return from the company.
In its news release Wednesday, Poseidon hinted it may have found more financial irregularities stemming back to when the company was born.
“Based upon the investigation by the special committee, questions have arisen with respect to the recorded revenues in the 2011 annual financials,” it stated.
“At this time, it is uncertain whether or not a restatement of the 2011 annual financials is required.”
Also Wednesday, the operator of the Toronto Stock Exchange announced it has launched a delisting review to determine if Poseidon, which remains halted, qualifies for continued listing.
The ASC said Poseidon had not applied as of Wednesday afternoon to have its cease trade order lifted.
Poseidon began trading in November 2011 after being spun off by junior explorer Open Range Energy Corp. to build and rent its unique oilfield storage systems that resemble giant above-ground swimming pools.
The tanks caught on quickly with companies using massive amounts of water in hydraulic fracturing of tight oil and gas wells but competitors rushed similar products to market.
In its release Wednesday, Poseidon reported that directors Dean Jensen and Harley Winger and interim chief executive Scott Dawson, the former Open Range president and CEO, had resigned.
It said Dawson and Neil Richardson were the only remaining directors.
A call to investor relations was not returned.
The company is to continue operating under its court-appointed monitor, PricewaterhouseCoopers, it said.
On its website, PwC reported the CCAA order included approval of a $6-million interim financing facility with Century Services LP to allow Poseidon to continue operating.
The lender was granted priority to secure repayment under the order, which also provided priority on $1 million for the monitor’s fees and disbursements and another $1 million to protect company directors and officers from certain potential liabilities.
Poseidon said it has hired Ernst & Young Orenda Corporate Finance Inc. to help solicit offers that could include a sale of all the assets, a reorganization, a recapitalization or a restructuring of loans.
Information packages are to be distributed to prospective bidders this week and bids will be due by May 15.
The CCAA order protects Poseidon from legal action until May 9 while it comes up with a restructuring plan. The company can apply to have the order extended.
Poseidon faces several class action lawsuits in Canada and the United States.
Dimitri Lascaris, a partner with Toronto law firm Siskinds LLP, said the CCAA order was expected and his firm is looking at what affect it will have on its proposed lawsuit.
“I can assure you at this time that we will take all necessary steps in the CCAA proceeding to protect the interests of the class members and to preserve their claims, including their claims against Poseidon’s current and former officers, directors, underwriters and principal banker (National Bank),” he said in an email.
Before being cease-traded, Poseidon shares were fetching 27 cents each, less than two per cent of their peak level of $16.88 last February. The company’s stock value had crashed to $22 million from $1.3 billion.
Last October, former chief executive Lyle Michaluk and president Cliff Wiebe won the emerging entrepreneur award in the Ernst & Young Entrepreneur Of The Year 2012 Prairies Awards.