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This article continues directory on from the first two in the series, you can read them by clicking on the following links: Part 1, Part 2
The current DBS board suggestion that if the resolutions are passed that Photon will then raise debt (their good at that) against the positive debt free DBS balance sheet and then potentially sell Photon assets into DBS is in my opinion unlikely to occur. The suggested goal is for Photon to get cash and DBS to run a new business.
 I’m uncertain whether this approach will actually raise significant amount of cash to help Photon out for their April debt challenge. Besides, a truly independent chairman is unlikely to just roll over and let the two Photon directors do whatever they like and potentially create a unlawful “not at arms-length” transaction in the process. If this is the case then I think it may be time to consult the DBS director’s liability insurance policy.
What’s the solution to this mess of messes? I think that DBS needs a white knight for the benefit all parties. They would have to take out the MMC parcel of shares so that loose end is tied up and the future temptation of an additional 17% was out of reach for everyone. All parties would need to bow out of an MMC auction (in whatever form) and the only benefit to MMC would be an exit with some liquidity. Such is life in a new economic world.
Given Photon’s shareholding they should be awarded at least one board seat and the white knight could elect to play the role of chairman or appoint a chairman in their stead. In my opinion everyone would need to agree to this decision prior to a white knight’s decision to invest.
The challenge will be to find a cashed up white knight that really understands a domain business and is respected by both the financial and domain communities. There’s not many of those individuals around and if one pops its head up then I think they could potentially demand a premium for their involvement. I’m unsure of the legalities but demanding a number of preference shares would not be unheard of.
So it’s interesting days ahead for DBS and all the different large players but here’s the downside for small shareholders. An EGM will cost DBS about $100K (ie. over 10% of projected profit) and I could think of a number of better things to do with $100K than hold an EGM. For the relationship between DBS and Photon to get to the stage of an EGM is ridiculous and is an indictment on the ALL of the party’s inability to manage difficult relationships.
It’s incredible that both Photon and DBS management have indicated to me that they have both made valiant attempts to resolve the relationship between themselves. Both parties have also told me that each time they’ve made an effort they have been rebuffed! I don’t know how this happens but it sounds to me like little children playing in a sand-box.
To be quite frank, I don’t really care about the personalities and who did what when and who is at fault. What I do know is that this mess is costing me money and it’s about time the majority owners stood up and worked together for the benefit of themselves and each other. Call me naive but I thought that this is what business is all about.
I think that the best hope for DBS is that a white knight appears, paddles a few rear-ends and gets everyone to work together for a greater, better DBS. After all, DBS has incredible domain assets, systems and staff that just need a fresh sense of direction where the management isn’t distracted by unprofitable activities and the synergies with shareholders can contribute in a productive manner. Anyone for taking up a lance?
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