News Release
For Immediate Distribution
Freienbach, Switzerland, February 4, 2025
iolite Capital Provides Background and Update Regarding Request for Special Shareholder Meeting of Dynacor
iolite Capital Management AG (“iolite”), a Switzerland-based investment management firm, is providing background and an update regarding the special meeting of shareholders of Dynacor Group Inc. (TSX: DNG, “Dynacor”, "the Company"), which was requisitioned by iolite Partners Ltd. on January 30, 2025.
Dynacor occupies a unique niche in a US$50 billion addressable market, offering an ecosystem that benefits a wide range of stakeholders.
iolite, the Company’s largest shareholder, is deeply invested in Dynacor’s financial success, and has consistently supported the Company’s growth plans.
Dynacor has long been seen as overcapitalized and materially undervalued.
On January 28 and 29, iolite met with board members to discuss Mr. Leitz’s board appointment, the Company’s growth strategy, funding needs, and its persistent undervaluation.
On January 30, despite recent record earnings, a dividend increase, and share buybacks, Dynacor unexpectedly announced an unnecessary and heavily discounted capital raise - against iolite’s indications that doing so what not in the best interest of Dynacor.
The capital raise immediately and unnecessarily destroyed C$25 million (US$17 million) in shareholder value, an effect which will compound over time.
Many existing shareholders - including iolite - were never given the opportunity to participate in this handpicked offering, an inherently unfair situation.
The CEO has already hinted that additional dilutive capital raises may follow.
iolite seeks to have Mr. Leitz appointed to Dynacor’s board to provide strategic guidance, enhance and protect shareholder value, ensure fair and responsible capital allocation, and drive sustainable earnings-per-share growth. This is particularly urgent given the Company’s significant cash reserves, which are at risk of being mismanaged. Dynacor has no track record in M&A and international expansion. Appointing Mr. Leitz, with his relevant expertise and ownership perspective, is in the Company’s best interest.
WE HAVE TO ASK: WHAT IS THE BOARD AFRAID OF ?
Underrepresentation of Shareholder Interests
Dynacor has long been recognized as an overcapitalized and materially undervalued company. However, it recently offered shares at a 10% discount - a move that should give every shareholder pause. Worse still, many existing shareholders - including iolite - were never given the opportunity to participate in this offering, an inherently unfair situation.
Even if some shareholders benefited from this discounted offering, it is crucial to consider the broader implications: the Board’s decisions do not appear to be in the Company's best interest, and the CEO has already suggested further dilutive capital raises may be required.
iolite seeks to have Mr. Leitz appointed to Dynacor’s board to provide strategic guidance, enhance and protect shareholder value, ensure fair and responsible capital allocation, and drive sustainable earnings-per-share growth. This is particularly urgent given the Company’s significant cash reserves, which are at risk of being mismanaged. Dynacor has no track record in M&A and international expansion. Appointing Mr. Leitz, with his relevant expertise and ownership perspective, is in the Company’s best interest.
LTM September 2024 (US$), at a share price of CAD 5.50:
Market Cap: 135 million
Net Cash: 42 million
Net Working Capital: 19 million
EBITDA: 31 million
NPAT: 21 million
Dividends: 4 million
Buybacks: 6 million
Recent Developments
Mr. Leitz traveled to Montreal and met with board members on January 28 and 29 to discuss the Company’s growth strategy, its undervaluation, and to meet directors he had not yet met in person. This visit was intended to be the final step in a lengthy process toward his appointment as a director. After very pleasant discussions, on January 30 - while heading to the airport - the Company unexpectedly announced a discounted capital raise, despite recently reporting record earnings, increasing its dividend, and buying back shares. Only a day earlier, board members had confirmed its view that the Company’s share price was severely undervalued.
Raising capital at a 10% discount to the prevailing market price - after acknowledging the share price is materially undervalued - primarily to fund a pilot plant in Senegal makes little sense. That project was initially estimated at US$2 million (later US$4 million), which represents only 5–10% of the Company’s September 2024 cash balance or roughly 1–2 months of corporate profit. Even when accounting for working capital needs and the potential acquisition of a plant in Latin America, there was no urgent need for additional cash. iolite has yet to receive a clear explanation as to why more affordable financing options, such as factoring or bank debt, were not pursued. On multiple occasions, iolite itself proposed lower-cost financing solutions if needed.
Furthermore, additional trading liquidity in Dynacor’s shares is unnecessary, given that the Company has been actively buying back its own shares and the existing trading volume is sufficient for its size. Issuing new shares for an undervalued company when there is no pressing need does not increase the intrinsic value per share - a point that has been repeatedly raised.
A Board With Underrepresented Shareholder Interests
Over the last twenty years, President & CEO Jean Martineau, aged 73, has built a successful business. However, Dynacor’s history with shareholders has been contentious. Mr. Martineau has consistently sold down shares, while the Board’s decisions remain heavily influenced by him - even though his effective ownership, primarily through stock options, amounts to only around 2.7%. He did not participate in the recent capital raise, when most other board members did. This track record raises serious questions for someone entrusted with increasing shareholder value.
The Role of iolite: Active Support And Constructive Dialogue
By contrast, iolite has provided both capital and strategic support to Dynacor for years:
Bought out activist hedge Fund Red Oak to resolve a shareholder dispute.
Attracted further supportive investors via iolite’s network.
Promoted Mr. Martineau’s pioneering role in the industry, Impact Gold, and the related foundation at investor events and conferences.
iolite has actively encouraged the Board to accelerate international expansion, offered Mr. Leitz’s network to support growth, and made multiple proposals for lower-cost funding if required - most recently the day before the unexpected raise was announced. All these efforts were aimed at strengthening, not undermining, Dynacor.
Governance and Capital Allocation Challenges
Numerous sincere attempts by shareholders - including iolite - to improve capital allocation and address the Company’s undervaluation have been ignored. For example, a proposal such as a partial tender of common equity into preferred equity - yielding around 8% for shareholders seeking higher cash returns - have been ignored. In the past, iolite has encouraged management to accelerate international expansion plans while emphasizing the need to remain self-funded and cautious, and to build a robust business development team given the CEO’s lack of a proven track record in executing international expansion and the need for succession planning.
Despite iolite’s sizable stake in Dynacor, the straightforward request for a board seat has been repeatedly delayed. iolite even offered to withdraw its request for a special meeting if Mr. Leitz were to join as one of nine directors - hardly an overreach. The
Board refused, thereby escalating the matter publicly.
This behavior is not indicative of robust corporate governance. The CEO claims widespread shareholder support - an assertion contradicted by iolite’s perspective and the hasty nature of the stock issuance.
Why Mr. Leitz's Candidacy Matters
iolite is deeply vested in Dynacor’s financial success. Mr. Leitz brings over two decades of experience in finance and commodities. Prior to founding iolite, he worked at Glencore, TPG Credit, Goldman Sachs’ European Special Situations Group, and KPMG Corporate Restructuring. He holds a Master of Science in Business Administration and Economics from the University of St. Gallen (HSG), having completed his master’s thesis at Columbia University under Professor Eli Noam. His proven track record in capital allocation and extensive industry relationships can help guide Dynacor toward sustainable, value-driven growth.
A Call to Action
Dynacor is a strong business with promising opportunities. However, without improved financial oversight, its potential is at risk.
The request for a board seat by iolite is in the best interest of the Company and should be resolved promptly. It is time to establish professional governance and ensure transparent communication. iolite’s priority is to ensure that capital allocation decisions are genuinely shareholder-friendly.
About iolite
Founded in 2011 by Robert Leitz, iolite Capital is a Switzerland-based investment manager with a focus on hidden champions: good businesses at attractive valuations. iolite serves a select circle of private and institutional clients who share the same entrepreneurial mindset, are willing to invest for the long term, and who would like to have first-hand access to a dedicated portfolio manager with substantial and meaningful skin in the game. Using a private equity approach, iolite conducts deep fundamental research, constructively engages with management, and adopts a long-term investment horizon. For more information on iolite, please visit www.iolitecapital.com.
Contacts
Robert Leitz
Managing Director
+41 79 227 29 08
Information in Support of Public Broadcast Solicitation
The information contained in this news release does not and is not meant to constitute a solicitation of a proxy by iolite within the meaning of applicable corporate and securities laws. Although iolite has requisitioned a meeting (the "Special Meeting") of the shareholders of Dynacor, there is currently no record or meeting date and shareholders are not being asked at this time to execute a proxy in favor of iolite`s nominee or any other resolutions set forth in the requisition. In connection with the Special Meeting, iolite is voluntarily providing the disclosure required under sections 9.2(4) and 9.2(6) of National Instrument 51-102 – Continuous Disclosure Obligations in accordance with corporate and securities laws applicable to public broadcast solicitations.
This news release and any solicitation made by iolite in advance of the Special Meeting is, or will be, as applicable, made by iolite and not by or on behalf of the management of Dynacor.
Shareholders of Dynacor are not being asked at this time to execute proxies in favor of iolite's nominee (in respect of the Special Meeting) or any other resolution that may be set forth in the requisition. iolite intends to make its solicitation primarily by mail, but proxies may also be solicited personally by telephone, email or other electronic means, as well as by newspaper or other media advertising or in person. In addition, iolite may solicit proxies in reliance upon the public broadcast exemption to the solicitation requirements under applicable Canadian corporate and securities laws, by way of public broadcast, including press release, speech or publication, and in any other manner permitted under applicable Canadian laws. Any members, partners, directors, officers or employees of iolite and its affiliates or other persons who solicit proxies on behalf of iolite will do so for no additional compensation. The costs incurred in the preparation and mailing of a circular in connection with the Special Meeting, and the solicitation of proxies by iolite will be borne by iolite, provided that, subject to applicable law, iolite may seek reimbursement from Dynacor of iolite's out-of-pocket expenses, including proxy solicitation expenses and legal fees, incurred in connection with a successful vote at the Special Meeting.
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