The return of Melissanidis and the problem of Aegean Marine Petroleum

Aegean Petroleum, which was founded by Dimitris Melissanidis and is traded on the New York Stock Exchange, has recently been the subject of strong criticism by analysts and stockholders, due to its dubious policies and strategy, and challenges to its decisions and actions.

Its share price has tumbled since the beginning of the year, losing nearly half its value, and nearly 80 percent of its value since the beginning of 2017.

The huge drop is attributed to continuing concerns about corporate governance and the competence of management, due to extensive transactions with Melissanidis and other related parties, and due to particularly loss-making investments.

In December, 2017, stockholders representing over 12 percent of all shareholders of Aegean Maritime Petroleum – led by Tyler Baron, manager of the portfolio of Sentinel Rock Capital – announced the creation of “The Committee for Aegean Accountability’.

At the same time, they made public a letter condemning the company’s policies and actions. The committee accuses Aegean’s Board of problematic corporate governance and poor financial and operational management. It also notes problematic clashes within the ranks of the Board, which contributed to the plunge in stock value.

The letter charges that Aegean’s Board of Directors is more interested in strengthening its own position than in cooperating with shareholders in good faith to make the necessary changes to improve corporate governance and performance.

The shareholders also express surprise and disappointment over the decision to decrease the number of Board members from seven to four, which limits stockholders’ ability to seek representation on the Board. The committee says it will nominate four individuals when the new Board will be elected at the 2018 annual shareholders’ meeting.

Corporate governance

At the end of 2017, shareholders were represented by only four out of seven Board members, even though the shareholders were all Americans. Three members were appointed by Melissanidis when the company was listed in New York. Mr. Spyridon Fokas, one of the original Board members and also general counsel of the company, continues to maintain close ties with Aegean’s founder, and became alternate president of the Greek gaming monopoly OPAP, of which Melissanidis is a shareholder.

In a new letter, published on 19 February, the president of the Committee for Aegean Accountability states: “The problematic past of the company’s Board of Directors regarding transactions with related parties, which favour Melissanidis at the expense of our shareholders, raises concerns that the Board may approve a transaction designed to reduce the influence of Aegean shareholders.”

Melissanidis’ stock sell-off

Given all of the above, Dimitris Melissanidis stock sell-off, on 19 September 2016, is of particular interest.

Aegean Marine bought Melissanidis’ 11.3 million stocks for 99.6 million dollars, with a share price of 8.81 dollars US. The transaction is notable for two reasons.

The first is the course of Aegean’s share price, which in July, 2015, had fallen to 5.23 dollars, and in less than two months rose to over 10 dollars, allowing Melissanidis to sell his stock at a particularly high price.

The second notable fact is that Aegean’s use of cash for this transaction led the company to violate its borrowing base certificate, just a few months after the buy-back of stocks.

The resulting liquidity crisis was addressed by the issuance of a transferable security, which led to a further drop in profits.

The buyout of Hellenic Environmental Centers (HEC)

The most recent blow to Aegean Marine shareholders came with Melissanidis return to sell his Hellenic Environmental Centers (HEC) to Aegean Marine. That transaction concerned the accountability committee and was viewed by shareholders with particular distrust. The share price tumbled by 38 percent immediately after the announcement of the purchase.

Tyler Baron, the head of the accountability committee, said that Aegean, in order to complete the buyout, issued the greatest number of stocks for any transaction in the company’s history, and at the lowest share price. That formally gave Melissanidis essential control of the company.

Aegean will also transfer 200mn dollars from the accounts due to Melissanidis, even though the company could have used that money to withdraw an outstanding transferable security.

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