£750 million cash injection for Avocet from mystery investors

by EWAN LAMB

Details of a massive financial deal involving the Avocet group of 'disruptive technology' companies has been greeted with scepticism by some of the company's shareholders and roundly criticised by a business analyst.

Despite warnings by Avocet chairman Martin Frost that his letters updating 650 investors must not be forwarded to third parties, Not Just Sheep & Rugby received copies of his weekend missive from several sources, each expressing disbelief at the sheer scale of the claims being made.

Mr Frost had indicated in a previous letter that he and fellow director Dr Bob Jennings would be travelling to Manchester to meet potential investors who wanted to acquire a large number of shares in Avocet.

Yesterday's update did not disappoint.

Mr Frost wrote: "Thursday’s and then Friday’s discussions were better than one could have hoped. At a uniform price, ten million existing untarnished Avocet Natural Capital (ANC) Plc shares shall be acquired. ANC Plc will increase its issued share capital to 54 million one pound shares to allow (at a premium price of £3 per ANC Plc ordinary share) £12 million cash to be injected into ANC Plc. for additional ANC working capital and to restore Omega Infinite Plc to the Register."

Omega, formerly called Avocet Infinite, was the parent company of the group before crashing into liquidation earlier this year with debts running into millions of pounds. A subsidiary, Orrdone Farms Ltd, is currently in the hands of joint administrators, also with significant debts and a list of trade creditors owed more than £600,000.

Mr Frost's letter headed 'Caution, a deal is not a deal until done' says: "There are the usual necessary undertakings required of Avocet key individuals and upon Avocet’s patent agents, Basck.

"Via the advance of a million pounds, the new investors obtain control of Avocet NC Limited [a company presently controlled by Lancashire chartered accountant Paul Newsham]. A 100 million one penny shares will be issued (54 million to existing ANC Plc shareholders, at the ratio of one penny share for each one ANC Plc share held and 46 million one penny shares to go to the new investors).

"The new investors then plan to inject into Avocet NC Limited some £750 million of which £500 million will go into fuel and alternative energy (based mainly North America), £150 million into renewable green methanol (mainly Middle East), and £100 million into agriculture (mainly Africa). The new investors will have an option to convert their Avocet NC Limited investment into 30 million new ANC Plc shares by December 31st, 2023."

According to Mr Frost the unnamed investors will encourage: ANC Plc’s shares immediate move to a trading platform; the‘avocet methanol’ project with water blended imported fossil methanol; their total management and governance of Avocet NC Limited; a new ANC Plc board upon which they shall have an observer; new intellectual property and the development of the ‘master franchise’ and‘golden supplier’ concepts; a quick determination and conclusion to the discussions.

Mr Frost concludes: "Dr.’Bob’ Jennings shall remain as a director and though otherwise requested; I shall resign from all operational roles, remaining a ‘Life President’ and observer of ANC Plc."

However, an experienced business analyst who read Saturday's letter said there were serious issues and questions which required full explanations.

The expert said it should be noted that under the terms of the proposed 'deal' Mr Frost would be issuing four million additional ANC shares, thus diluting the existing shareholders by 7.4%. 

"He is diluting the existing shareholders despite currently personally “holding” over six million ANC unpaid for shares 'for future buyers of ANC Plc shares'.

"Now here is exactly the buyer that he said that he was waiting for - one willing to pay a premium – in this case, £2/share.  Why then, is he diluting the existing shareholders rather than honouring his commitment? 

"At £3/share, this values ANC at £162 million, well in excess of its 2019 book value (£40 million), well in excess of the last Coller IP valuation (£41 million to £62 million), and well in excess of even Mr Frost's own personal opinion of its worth - 'in my opinion, ANC Plc’s worth to me is £50 million plus'...(Martin Frost letter - July 12, 2020).  Why would this mystery buyer be willing to pay three times what Mr Frost cites as the general consensus as to value?"

The source added: "The new investor will be investing £22-£34 million (4 million@ £3/share plus 10 million@ an estimated £1-£2.40p/share) in ANC.  This is almost equal to, and possibly well in excess of, the total investment put into Avocet shares since the company’s inception! 

"It is also, on a per share basis, three times the general consensus as to worth which has been cited by Mr Frost. For essentially doubling or more the existing investment in the company he/she is getting only 26% of the company’s shares.  And ANC as it stands has no cash and no commercially viable products.  From all objective viewpoints, this investor is getting a very bad deal."