Author Topic: SYTE - Enterprise Diversified  (Read 212074 times)

Tim Eriksen

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Re: SYTE - Sitestar
« Reply #270 on: January 30, 2017, 04:40:35 PM »
I beg to differ that he is getting paid twice to manage the same money.  They are two separate issues it is just that the same person is doing both.  He is getting paid as a fund manager to allocate capital.  He is also getting paid as the CEO which entails a whole lot more than managing the company's capital.  Being in that situation as a part time CEO I can attest to the different use of time.  It is not an overlap.  I suspect you would have no problem if a hired CEO got paid that amount.  To expect him to work for nothing when you would happily pay someone else shows the rationale of your argument is flawed. 

     


InelegantInvestor

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Re: SYTE - Sitestar
« Reply #271 on: January 30, 2017, 04:49:02 PM »
I beg to differ that he is getting paid twice to manage the same money.  They are two separate issues it is just that the same person is doing both.  He is getting paid as a fund manager to allocate capital.  He is also getting paid as the CEO which entails a whole lot more than managing the company's capital.  Being in that situation as a part time CEO I can attest to the different use of time.  It is not an overlap.  I suspect you would have no problem if a hired CEO got paid that amount.  To expect him to work for nothing when you would happily pay someone else shows the rationale of your argument is flawed. 

     
The company has one operating business- the ISP. The employee in charge of the ISP makes around $35,000, if I recall correctly. The vast majority of the firm's capital is now tied up in various investment partnerships- HVAC, Alluvial, and now Huckleberry. For all practical purposes, this is a Fund of Funds. His salary as CEO is primarily tied to his capital allocation.

I think it would also be relevant to disclose that you were one of the select few who was allowed to participate in the second below market private placement, purchasing 10,000,000 shares at $.05 when trades on the open market were crossing well above $.08

Parsad

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Re: SYTE - Sitestar
« Reply #272 on: January 30, 2017, 04:57:55 PM »
Hi Inelegant,

Didn't realize you wrote that post...thought it was written by someone else and posted to your site.

In terms of your comments:

Also, though it is modest, he is being doubly compensated as funds that he manages own the majority of the company's equity.

This isn't quite correct.  Owning a significant amount of a company in the funds is a double-edged sword.  He will benefit greatly if things work out well.  If things go sideways, he receives no compensation from either the fund or Sitestar.  If things work out poorly even though he worked hard and diligently, he will not only have worked for free at Sitestar, but will not receive any compensation from his fund until he reaches his high watermark. 

Again, this is based him operating a fund like mine with only an incentive fee and no management fee.  If he has a management fee, then this doesn't apply.  Also, if there was an agreement with shareholders before the AGM that he would work for free, and then suddenly added a compensation package after the AGM, that isn't ethical either.  Is that what happened?

When Mr. Kiel, et. al. were selling themselves shares at $.048, the market bid and ask were each above $.08.

If this is correct also, then I agree that this is completely unethical!

Cheers!
No man is a failure who has friends!

InelegantInvestor

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Re: SYTE - Sitestar
« Reply #273 on: January 30, 2017, 05:05:36 PM »
Hi Inelegant,

Didn't realize you wrote that post...thought it was written by someone else and posted to your site.

In terms of your comments:

Also, though it is modest, he is being doubly compensated as funds that he manages own the majority of the company's equity.

This isn't quite correct.  Owning a significant amount of a company in the funds is a double-edged sword.  He will benefit greatly if things work out well.  If things go sideways, he receives no compensation from either the fund or Sitestar.  If things work out poorly even though he worked hard and diligently, he will not only have worked for free at Sitestar, but will not receive any compensation from his fund until he reaches his high watermark. 

Again, this is based him operating a fund like mine with only an incentive fee and no management fee.  If he has a management fee, then this doesn't apply.  Also, if there was an agreement with shareholders before the AGM that he would work for free, and then suddenly added a compensation package after the AGM, that isn't ethical either.  Is that what happened?

When Mr. Kiel, et. al. were selling themselves shares at $.048, the market bid and ask were each above $.08.

If this is correct also, then I agree that this is completely unethical!

Cheers!
The AGM was four months ago. As you know, the proxy includes an advisory vote on executive compensation. He was receiving nothing at that time. Four months later, this was added. Was there explicit agreement? No. But I would argue that it was implicit. This comes down to a question of what is legal and what is proper. I would argue that it is legal, but improper.

I believe my statement about the bid & ask to be true, but it is possible my memory is faulty. I can assure you that the market trades were happening well above the price Mr. Kiel paid. He justified that earlier in this thread by stating that the shares are restricted and the restrictions depress their value.

Keep up the good work at PDH. I know it's been a challenging year, but I think the moves you are making make eminent sense.

Parsad

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Re: SYTE - Sitestar
« Reply #274 on: January 30, 2017, 05:12:11 PM »
I beg to differ that he is getting paid twice to manage the same money.  They are two separate issues it is just that the same person is doing both.  He is getting paid as a fund manager to allocate capital.  He is also getting paid as the CEO which entails a whole lot more than managing the company's capital.  Being in that situation as a part time CEO I can attest to the different use of time.  It is not an overlap.  I suspect you would have no problem if a hired CEO got paid that amount.  To expect him to work for nothing when you would happily pay someone else shows the rationale of your argument is flawed. 

     
The company has one operating business- the ISP. The employee in charge of the ISP makes around $35,000, if I recall correctly. The vast majority of the firm's capital is now tied up in various investment partnerships- HVAC, Alluvial, and now Huckleberry. For all practical purposes, this is a Fund of Funds. His salary as CEO is primarily tied to his capital allocation.

I think it would also be relevant to disclose that you were one of the select few who was allowed to participate in the second below market private placement, purchasing 10,000,000 shares at $.05 when trades on the open market were crossing well above $.08

Yes, it has one business now, but he's getting paid to grow and add businesses, correct? 

When I took over PDH, it only had one operating business (China) and the Burnaby clinic was shut down.  Now China (I will discuss in the letter, but obvious) is the more troubled business, the Burnaby clinic is operating great and growing, and we have two other businesses...Sequant Re, GOeVisit.com, an investment portfolio (Russell Breweries and other holdings) and real estate development (Kingswood).  And there were probably discussions with four other businesses we didn't close, but were in negotiations with.  So all of that takes a considerable amount of work.

If all Kiel is going to do is manage the one existing ISP, then you might be able to make a case.  If he is being paid to grow and add businesses, then he has to receive some sort of compensation.

I do think you have a real case with the share discount though.  Doesn't matter if intrinsic value was lower.  If there were bids at around $0.08, you can't issue a nearly 40% discount...it's just not right...even if volume is thin.  Cheers! 
No man is a failure who has friends!

Tim Eriksen

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Re: SYTE - Sitestar
« Reply #275 on: January 30, 2017, 05:16:19 PM »
I beg to differ that he is getting paid twice to manage the same money.  They are two separate issues it is just that the same person is doing both.  He is getting paid as a fund manager to allocate capital.  He is also getting paid as the CEO which entails a whole lot more than managing the company's capital.  Being in that situation as a part time CEO I can attest to the different use of time.  It is not an overlap.  I suspect you would have no problem if a hired CEO got paid that amount.  To expect him to work for nothing when you would happily pay someone else shows the rationale of your argument is flawed. 

     
The company has one operating business- the ISP. The employee in charge of the ISP makes around $35,000, if I recall correctly. The vast majority of the firm's capital is now tied up in various investment partnerships- HVAC, Alluvial, and now Huckleberry. For all practical purposes, this is a Fund of Funds. His salary as CEO is primarily tied to his capital allocation.

I think it would also be relevant to disclose that you were one of the select few who was allowed to participate in the second below market private placement, purchasing 10,000,000 shares at $.05 when trades on the open market were crossing well above $.08

1. Yes I participated.  That is public record.  I called them, asked about it, met management and then decided to participate.  It wasn't an insider deal.  The offering was under subscribed despite the discount.  I have not heard of anyone not being allowed to participate.  I recognize that it is harder for non-accredited investors. 
2. They do still have real estate.
3. How many 10Q's and 8-K's have you been responsible for?  They don't happen automatically.  You would be surprised at the amount of time that takes.    Let alone employment issues, contracts, day to day management, strategy, board meeting preparation, budgeting, etc.     
4. The market price for common stock was $0.08 when I participated and the market knew they were doing an offering of restricted stock.  Restricted stock is different.  It is not worth the same as long as the restrictions are in place.  If you have ever talked to someone who needs to sell restricted stock you would know they are in quite a difficult situation. 

I wish you the best if you still hold or have moved on to something else.  I have been on your side where I am convinced I and shareholders were wronged.  It is frustrating.
« Last Edit: January 30, 2017, 05:18:38 PM by Tim Eriksen »

InelegantInvestor

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Re: SYTE - Sitestar
« Reply #276 on: January 30, 2017, 05:25:44 PM »
I beg to differ that he is getting paid twice to manage the same money.  They are two separate issues it is just that the same person is doing both.  He is getting paid as a fund manager to allocate capital.  He is also getting paid as the CEO which entails a whole lot more than managing the company's capital.  Being in that situation as a part time CEO I can attest to the different use of time.  It is not an overlap.  I suspect you would have no problem if a hired CEO got paid that amount.  To expect him to work for nothing when you would happily pay someone else shows the rationale of your argument is flawed. 

     
The company has one operating business- the ISP. The employee in charge of the ISP makes around $35,000, if I recall correctly. The vast majority of the firm's capital is now tied up in various investment partnerships- HVAC, Alluvial, and now Huckleberry. For all practical purposes, this is a Fund of Funds. His salary as CEO is primarily tied to his capital allocation.

I think it would also be relevant to disclose that you were one of the select few who was allowed to participate in the second below market private placement, purchasing 10,000,000 shares at $.05 when trades on the open market were crossing well above $.08

Yes, it has one business now, but he's getting paid to grow and add businesses, correct? 

When I took over PDH, it only had one operating business (China) and the Burnaby clinic was shut down.  Now China (I will discuss in the letter, but obvious) is the more troubled business, the Burnaby clinic is operating great and growing, and we have two other businesses...Sequant Re, GOeVisit.com, an investment portfolio (Russell Breweries and other holdings) and real estate development (Kingswood).  And there were probably discussions with four other businesses we didn't close, but were in negotiations with.  So all of that takes a considerable amount of work.

If all Kiel is going to do is manage the one existing ISP, then you might be able to make a case.  If he is being paid to grow and add businesses, then he has to receive some sort of compensation.

I do think you have a real case with the share discount though.  Doesn't matter if intrinsic value was lower.  If there were bids at around $0.08, you can't issue a nearly 40% discount...it's just not right...even if volume is thin.  Cheers!
So far, he has added 3 investments. All of them are partnerships managed by others where Sitestar seems to be merely a provider of capital.
I don't disagree that he ought to get some compensation. But the structure ought to be approved by independent Directors, and there really are not any.

maybe4less

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Re: SYTE - Sitestar
« Reply #277 on: January 30, 2017, 05:28:57 PM »
1. Yes I participated.  That is public record.  I called them, asked about it, met management and then decided to participate.  It wasn't an insider deal.  The offering was under subscribed despite the discount.  I have not heard of anyone not being allowed to participate.  I recognize that it is harder for non-accredited investors. 

My understanding is that anyone who met the legal requirement (i.e., was an accredited investor) was allowed to invest, not just management's "buddies." It's a bummer that non-accredited investors could not participate, but you can blame congress for that. A rights offering would have been too expensive for a raise of this size.

2. They do still have real estate.

The HVAC business is structured as a "fund," but is very much an operating business too.




InelegantInvestor

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Re: SYTE - Sitestar
« Reply #278 on: January 30, 2017, 05:50:35 PM »
1. Yes I participated.  That is public record.  I called them, asked about it, met management and then decided to participate.  It wasn't an insider deal.  The offering was under subscribed despite the discount.  I have not heard of anyone not being allowed to participate.  I recognize that it is harder for non-accredited investors. 
2. They do still have real estate.
3. How many 10Q's and 8-K's have you been responsible for?  They don't happen automatically.  You would be surprised at the amount of time that takes.    Let alone employment issues, contracts, day to day management, strategy, board meeting preparation, budgeting, etc.     
4. The market price for common stock was $0.08 when I participated and the market knew they were doing an offering of restricted stock.  Restricted stock is different.  It is not worth the same as long as the restrictions are in place.  If you have ever talked to someone who needs to sell restricted stock you would know they are in quite a difficult situation. 

I wish you the best if you still hold or have moved on to something else.  I have been on your side where I am convinced I and shareholders were wronged.  It is frustrating.

Tim-
  Thank you for your thoughtful response.
1. I think there is a distinction between the first and second offering. The first granted Mr. Kiel complete control and was entirely unexpected, at least by me. It included no outsiders, to my knowledge. The second was a bit different. Mr. Kiel already controlled over 50% of shares, and had committed more capital than the company had to various funds. That said, I had various discussions with Mr. Kiel and Mr. Moore prior to the second offering and it was never even suggested to me that I might have the opportunity to participate.
2. True, they do still have some real estate, though the vast majority has been sold.
3. I have not, but I understand thy take work. If that's a concern, buy out outside shareholders and go private.
4. I have had and continue to have restricted stock in various concerns. In an illiquid stock like this, the distinction between restricted and unrestricted stock is lessened. I am not technically restricted from selling my shares, but I cannot do so in a short amount of time w/o moving the price drastically. Again, I would also make a distinction between the first and second offering. The first gave Mr. Kiel control, and that should come with a premium.

I still have a bit more than half of my initial position, and I will continue to sell opportunistically. I will not hold a fire sale(and I am not the 500K shares that have been sitting on the ask for weeks). I appreciate your well-wishes. I truly hope that the stock goes up here. I don't disagree with most of the investment decisions Mr. Kiel has made. I just don't think that the ends justify the means.

InelegantInvestor

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Re: SYTE - Sitestar
« Reply #279 on: January 30, 2017, 05:54:33 PM »
1. Yes I participated.  That is public record.  I called them, asked about it, met management and then decided to participate.  It wasn't an insider deal.  The offering was under subscribed despite the discount.  I have not heard of anyone not being allowed to participate.  I recognize that it is harder for non-accredited investors. 

My understanding is that anyone who met the legal requirement (i.e., was an accredited investor) was allowed to invest, not just management's "buddies." It's a bummer that non-accredited investors could not participate, but you can blame congress for that. A rights offering would have been too expensive for a raise of this size.


I do not believe this was true of the first offering. In any case, they could have reached out to larger shareholders and gauged interest. I can't say they didn't reach out to anyone, but the never reached out to me, and I was over 2% of outstanding shares pre-offering(which they knew).