RVX POV AGM Sept 22 2022

Who knows what tomorrow will bring but the past 3 years of evidence suggests to me not to hold my breath. Note – the bolding below is mine. Hope my poor old “apabetalone” deprived mind got the calcs reasonably right.  J

I’ve been thinking about the votes for BOD approval from the June 21 AGM. At first blush with “for” votes at 94.44% in favour for Don the initial impression is that shareholders are quite satisfied with Don’s performance. The real picture is not this rosy. These are numbers we are all familiar with.

The key points from the above table are as follows;

• There has been a dramatic increase in “withheld” proxies rising to 5.54 % for Don, the highest dissatisfaction level of all directors.
• Dissatisfaction levels grew significantly across all directors in just one year.

I realized that I could use data from my research company and our customer satisfaction/retention division to provide a more realistic picture of shareholder dissatisfaction at RVX. My company has over 25 years of experience across a wide array of clients plus we have data from many other research companies across thousands of brands worldwide that provides relevant insight.

Following Are Some Important Macro Observations From Customer/Shareholder Retention Studies Relevant to Understanding & Projecting the “withheld” votes.

1. Our company has found that for every customer complaint submitted there is anywhere between 15 to 30 dissatisfied customers that do not complain. i.e. shareholders that don't submit their proxies.
2. 96% of unhappy customers don't complain, but 91% of those will simply leave (the brand). This statistic, according to 1st Financial Training Services, goes hand-in-hand with the above one. Don't assume that no news is good news.
3. A dissatisfied customer/shareholder will tell between 9-15 people about their experience.
4. Increasing customer retention (shareholder retention) rates by just 5% can increase profits (i.e. share price) by between 25% and 95%. (Bain and Company)
5. Investing in new customers/shareholders is between 5 and 25 times more expensive than retaining existing shareholders. (Invesp) this is the cost of Don’s continuous dilution. i.e. keep shareholders happy.
6. 58% of American consumers will switch companies (i.e. sell RVX shares) because of poor customer service. (Microsoft) e.g. Don’s mushroom management.
7. 89% of consumers are more likely to make another purchase after a positive customer service experience. (Salesforce Research)
8. If the company’s customer service is excellent, 78% of consumers will do business with a company again after a mistake. (Salesforce Research)
9. 94% of consumers who give a company a “very good” CX (customer experience) rating are likely to recommend that company. {Qualtrics XM Institute}
10. 65% of US consumers would pay 5% more for products if they knew they would receive outstanding customer service. (Emplifi)

AUGUST 15, 2012 8:40 PMUPDATED 10 YEARS AGO

Unhappiness runs deep when shareholders withhold votes: study

By Emmanuel Olaoye

WASHINGTON (Reuters) - Shareholders who choose to “withhold” their vote for a corporate board member are more dissatisfied than it may initially seem, according to a study released Wednesday by two corporate governance organizations. (this same study noted that a 10% “withhold” level suggests serious problems are evident)

The study, conducted by GMI Ratings and commissioned by the Investor Responsibility Research Centre Institute (IRRCi), concluded that a higher-than-average level of withheld votes in a board election shows that shareholders may not only be dissatisfied about the nomination of an individual director but with the board as a whole.

So these perspectives set the background for the RVX BOD stats reviewed below.

Voting Results at the AGM

We can hazard some guesses about who is voting “for” or “withheld” based on the information from the number of shares held by the top 10 shareholders of RVX.

First note that 53.7% of available votes were cast either “for” or “withheld”, i.e. the participation rate was 53.7% of potential votes.

It would be fair to assume that Hepalink and ORI Capital gave Don positive votes of confidence i.e. voted “for”.

If so, then we can deduce that Eastern Capital abstained from voting because the total of the top 3 exceeds the 125 million votes “for” Don and Eastern’s shares are greater than the WH for Don. Eastern seemed to have lost interest in RVX many years ago so perhaps their indifference was to be expected.

Now the question becomes which other shareholders account for Don’s other 23,583,287 “for” votes? That is, who else are Don’s supporters?

Note that the share ownership data used in this document comes from a March 2022 update presentation by RVX.

The table below presents one possible voting scenario. There are other possibilities so shareholders and posters with better information please propose your thoughts…plug and play as you see fit.

The following scenario assumes that Don gets all of his support from the Chinese investors.

Under this scenario both Eastern and NGN Capital have abstained.

Originally I had Dr Wong classified as a supporter of Don but the “for” votes would then exceed 125 million, thus I moved him into the abstain group. Another option is to put Dr Wong in the “for” votes and move Efung out of support.

In this scenario the balance of the positive votes for Don, 2,535,834 votes, can only have come from retail shareholders. That is 2,535,834/74,797,490=3.39% of potential retail shareholder votes went positively for Don…not exactly a great show of confidence.

Another option is to move Efung down to abstain and move either Protair or CD Ventures up to being supporters of Don. This would then shift the unknown supporters of Don to roughly 1,000,000, which then can only come from retail shareholders.

There were 113,886,552 potential votes that were not cast. We have proven that Eastern accounts for 27,712,879 of the non-votes and NGN Capital accounts for another 9,197,521. That leaves 76,976,152 after these two are removed.

Let’s turn our attention to the 7.3 million votes of “non-confidence” cast for Don. It is mathematically possible that some of the 7,326,179 “withheld” votes for Don came from one or more of Protair, CD Ventures, Efung Capital or even Dr Wong, but I don’t think this is very likely. Dr Wong and Efung control just over 6 million votes so they fit within the 7.3 million and leave a balance of 1,238,000 dissatisfied votes that would then be attributed to “retail shareholders”. This is the highest possible combination and it seems very unlikely.

I am going to assume two scenarios to account for negative votes for Don.

• Scenario 1 – Protair, CD Ventures, Eastern, Dr Wong and NGN Capital all abstained from voting in which case all the 7,326,179 dissatisfied votes come from retail shareholders. This scenario makes sense because all of these companies are sophisticated investors or have inside information.
• Scenario 2 – One of Protair or CD Ventures voted “withhold” for Don leaving the balance of negative votes of approximately 2.8 million which the can only come from retail shareholders.

I believe that scenario 1 is the most realistic description of shareholder opinions.

Now this is where the learning from customer/shareholder retention research studies becomes relevant. (consumer complaint multipliers)

People that did not submit their proxy votes could be considered to be similar to dissatisfied consumers that do not complain. It is not a perfect analogy because most shareholders should have received the proxy forms. i.e. their “complaint” was solicited -similar to an online customer satisfaction survey).

However, there are similarities;

1. Consumers don’t complain because the consumer complaint process is considered difficult because it requires lots of work to submit a complaint (finding company address/website, finding dept, writing/wording the complaint, etc). Hence, consumers just switch brands/investments.
2. Likewise shareholder voting requires the shareholder to review the 47-page information circular form and wade through legal and accounting jargon.
3. This form is full of dense paragraphs of relatively meaningless information worded in legal type language.
4. The “Information Circular” is not clear, concise nor voter friendly.
5. Shareholders often think their opinion does not matter or is too small to count so they don’t bother to send in the form.

Hence, many shareholders don’t bother to vote even though they are dissatisfied and have a vested financial interest.

This reasoning does not apply to sophisticated investors like CD Ventures or NGN Capital in my opinion. They are more likely to have made a conscious decision to abstain.

Rather than apply a 15 to 30 times multiplier of complaints to dissatisfied shareholders (“withheld” votes) I’ll assume that, because the investor has been solicited to vote and they should be concerned for their investments, a multiplier of 7 would be more appropriate. This is a judgement call but 7 would be the minimum multiplier for sure.

Using a multiplier of 7 would project the number of “withheld” votes from retail investors to be anywhere from 19.8 million to 51.3 million “withhold” or non-confidence votes. This clearly indicates that large numbers of retail shareholders are very unhappy having Don as a director.

Putting this in perspective we can re-draw the voting statistics.

These calculations offer a very different picture of the shareholder landscape than what was presented by RVX where they show 94.46% “for” Don and 5.54% “withheld”. In fact, for scenario 1 Don’s votes would be 50.8% “for”, 28.4% “abstain” and 20.8% “withhold” (against).

Chinese companies control 46.6% of Resverlogix shares. If these companies are working together they hold considerable sway over the company and it’s decisions.

Observations & Questions

I’ll leave it to readers to draw their own conclusions but I offer a few observations.

1. A more realistic representation of shareholder satisfaction than the 94.5% “for” Don vs 5.5% “withheld” is 50.1% “for”, 28.4% “abstained” and 20.8% “withheld”.
2. The projected satisfaction levels for Don are 3.3% “for”, 28.1% “abstained” and 68.4% “withheld” within the 74,497,490 shares held by retail share owners. Retail shareholders are very unhappy. Refer back to the section on shareholder retention. This level of dissatisfaction leads to churn/selling shares, not recommending the stock, not willing to pay for the scientific discoveries (e.g. BTD), warning others to avoid the stock. In short everything to erode the shareholder perception of value and future potential.
3. Eastern abstained and NGN Capital very likely abstained. Have they just turned a blind eye on this investment? Why did they not vote against Don if they are unhappy? Or "for" him if they he instills their confidence in his leadership? Why are they not taking charge of their investments?
4. Given their large share holdings why haven’t Eastern and NGN actively sought board seats? I believe that Dr Johann may have been on the board in the past.
5. Considering their insider information and large share positions why haven’t others in the top ten either supported Don or voted against him?
6. Given that 46.6% share holdings of Chinese companies in RVX is Don’s lack of progress because his hands are tied?
7. Why aren’t the large Chinese investors stepping up to the plate and funding BoM2? Is this a waiting game for Don to fail completely?

Many years ago I remember it being reported that Dr Wong had a very strong relationship with Kenneth Dart at Eastern and that Dart told Dr Wong that Eastern would be a supporter of RVX until apabetalone was on the market. That dream began to fade when Dart provided the backing for the Citi loan rather than directly providing more investment. Then when that was paid out Eastern faded again and Hepa took over and Chinese investors started flowing in. There has been a significant amount of scientific achievement along the way in parallel with numerous poor management decisions. Now even Dr Wong has left RVX. I wonder what is creating the apparent loss of confidence or at least interest?

Just some thoughts I wanted to share (get off my chest   J ).

Cheers

Toinv