Tuesday, July 12, 2011

Who's on First?

It is a bit troublesome when a public company’s filings are littered with notices of changes in leadership  -  departures, resignations and appointments.  In August 2010, PetroAlgae, Inc. (PALG:  OTC/PK) filed to stage an initial public offering  -  that is its first public offering following a reverse merger into a public shell in 2008.  Since then  -  ostensibly in preparation for the IPO  -  the company has filed notices for several changes in its organizational chart.

When the S-1 form was filed with the SEC detailing the planned public offering, John Scott was Chairman and Chief Executive Officer.  Scott was drafted as CEO in August 2009, after having already served a year as chairman.  Something of a “serial scientist-entrepreneur,” Scott already had eleven notches on his belt for technology-based ventures through a holding company called XL Tech.  With multiple degrees in astrophysics and physics, Scott had also left his mark at several universities across the country as a professor. 

After also serving as a National Research Council Fellow for NASA, the algae-growing business as PetroAlgae must seem like watching paint dry for Scott.  Perhaps it was a relief for him that in November 2011, just a few months into the public offering process, the company hired a new President and Chief Operating Officer, Rob Harris.

Compared to Scott, Harris is more a “hands on” sort, with a couple decades experience in operations at British Petroleum, now BP (BP:  NYSE).  He held several senior operating positions at BP, most recently in procurement for the refining and chemical portfolio.  Perhaps more important to PetroAlgae is Harris’ experience since leaving BP.  Most recently, Harris worked as non-executive director of Ethanol Ventures Ltd., a United Kingdom-based bioethanol company.

Unfortunately, Mr. Harris was not long for PetroAlgae.  Frankly, most people, myself included, could have put up with quite a bit for a $300,000 salary and 12,500 shares up front in a company with three bulge-bracket investment banks signed up to lead a public officing of its common stock.  However, Mr. Harris tendered his resignation in March 2011.  He did have to give up the stock, but a got a parting gift of $275,000.

The company has not announced a replacement for Harris as COO, but has replaced Scott as CEO.  Mid-June 2011, PetroAlgae signed Anthony Tiarks as Chief Executive Officer.  Scott remains with the Company as Chairman of the Board.

Most recently Tiarks has been CEO of Liberty Aerospace, Inc., a privately-held aircraft design company.  In a previous life Tiarks was an investment banker and money broker at Donaldson, Lufkin and Jennerette and Tide Brokers Ltd.  The banking background helps explain why Tiarks employment agreement provides for a one-time $30,000 signing bonus, a practice common in the banking industry.  Tiarks is also getting a $300,000 salary, stock appreciation rights and performance bonuses.

As diverse as their backgrounds might be, one thing these men have in common is their ownership in PetroAlgae.  None of the three have ever opened up their check book to buy so much as one share of PALG.  Granted the offering process limits insiders.  Somehow it seems only fair to shareholders that those in the executive suite should see the rise and fall of their company’s stock in their own brokerage accounts.

The first thing insiders might have noticed during all this shuffling around of executives is that PetroAlgae’s stock is no longer quoted on the Over-the-Counter Bulletin Board due to lack of activity.  Instead, investors must go to OTC Link, the old Pink Sheets, to see PALG quoted.  The company remains fully reported and is current on all SEC filings even though its public offering appears to have dragged on with little progress.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.  PALG is included in Crystal Equity Research’s Beach Boys Index in the Algae Group.

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