Crown Point major stockholder objects to $15 million private placement

Deal takes unfair advantage of market exchange rates, LAIG Oil claims

By Devika Patel

Knoxville, Tenn., Nov. 18 – Crown Point Energy Inc. stockholder LAIG Oil Investments announced that it has “serious concerns” about a $15 million private placement of stock that priced on Nov. 17. LAIG owns about 6.7% of the company’s stock.

In the placement, the company plans to sell 51,724,138 common shares at $0.29 apiece.

LAIG said in a Tuesday press release that the company's description of the issue price, and the resulting premium to the price of Crown Point’s common shares, is “materially misleading.” The stockholder said that the new investors would be taking advantage of the differential between the official U.S. dollar exchange rate in Argentina, which was used to price the private placement, and the implicit exchange rate that actually prevails in the market.

LAIG said in the release that the effective price of the stock sold in the placement would actually be C$0.226 per share, which is a 9.6% discount to the Nov. 14 closing price of C$0.25 and 23% and 19% discounts to the 90- and 60-day trading average of the stock.

The stockholder continued in its complaint, stating that it believes the placement “has been egregiously structured in two tranches to circumvent the regulatory requirement for disinterested shareholder approval for the entire private placement ... and timed to entrench [the company’s] management and board of directors ... to change the composition of the board.”

LAIG claims that the first tranche of the placement, without shareholder approval, is intended to ensure that 19.9% of the outstanding shares are voted in support of the board and management.

“The issuance of a substantial block of voting shares into ‘friendly’ hands, which undoubtedly carries with it voting commitments and ‘standstill’ limitations, would have a material impact upon the ability of shareholders to effect change in the board of directors (and therefore management) and a significant impact on control of the company,” LAIG said in the press release.

In conclusion, the stockholder asked that the Crown Point board to consider the views of all shareholders by seeking disinterested shareholder approval for the entire placement.

The oil and gas exploration and development company is based in Calgary, Alta.

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