Trying to make sense of this.

Where do we go from here?


Rather than jump in immediately with an emotive response to this takeover offer, I have tried to take a little time, allow my emotions to settle down and try to reach some conclusions.


It is clear that whatever happens now, we cannot go back to the situation we had before this bombshell was dropped on us. In actuality, we need to establish and find our way to, the "least worst" outcome for ourselves. We probably cannot "unscramble the egg".


As you might imagine, I, perhaps more than many, feel personally betrayed. However, my hurt feelings actually have no place in this discussion so I will try my hardest to put them aside in favour of a dispassionate discussion of our situation.


Many of us began our investment in CST anything up to 10 years ago. CST was a speculative investment but the research that many of us did allowed us to believe that this investment had a very good chance of bearing fruit. As investors in a business we accepted the difficulties encountered along the way and were content to exchange immediate rewards for the potential future rewards. 


Of course, like any speculative investment, there was always the possibility of the business failing - that has always been acknowledged but still allowed a risk/reward position that was acceptable.


We were right. As time went on, the business did succeed and the risks of failure diminished, even though the rewards to us only reached a trickle. That was an acceptable position at this point in time because it was possible to see the potential for those rewards to increase in time. 


At any point during our investment we had the choice of whether to "stay or go". Based upon what we saw and what we were told, most of us made the choice to stay. As of last Friday, everybody had used their right to make that choice. This is an important point. As of Monday, that choice has largely been taken away from us. We have now pretty much been been told that regardless of what we think about the future we must sell our shares in the Company at a specific price.


Bear in mind that  the Directors number one priority is to run the Company to the maximum benefit of the shareholders. All other considerations, even curing the world of TB, are of a lower priority. 


Now, maybe the Directors have some good reasons as to why they feel that the future of QFT is enhanced by it being snuggled between the buttocks of a giant International Company. That may even be true - I don't know. More importantly, I don't care - this deal excises me from the story. However, as stated above, the advancement of QFT, per se, should not be the number one priority of the Directors. 


The priority of the Directors to run the Company to the maximum benefit of the shareholders is the direct outcome of their decision to float the Company some ten years ago. Just as we as investors accept that investing in a publicly listed company rather than some other investment comes with some advantages and some disadvantages, the decision of the Directors to float the Company ten years ago comes with some advantages and disadvantages for them. They gain the advantage of using our capital to build the company but they have the "disadvantage" of being answerable to the shareholders and some very specific legal requirements.


For this "deal" to be "fair" to the shareholders they must prove that selling our shares at $3.55 is a better financial outcome for us than continuing to run the Company as it is - even if that would mean that sales of QFT might be larger with CST operating as a subsidiary of a giant International Company (which is irrelevant to us). 


I will be most interested to see both the Independent Valuation and the assumptions that lie behind that valuation. This is crucial. I might say that statements such as "x% above VWAP" are nonsense. For we investors this is not about a premium to the share price. It is about receiving true value for our shares and being able to make an appropriate decision for ourselves. You cannot validate an offer price by comparing it to the Share Price. The Share Price rarely reflects the true value of a Company. Nobody can convince me that the "value" of the Company has changed from $2.40 to $3.00 in the matter of a couple of months. 


If nothing changes, I will vote NO on this deal. 


I will, no doubt, have much more to say on this.