JKX board restricts Kolomoisky voting at upcoming shareholder meeting

JKX Oil & Gas (JKX LN) reported on Jan. 25 that its board ruled to restrict shareholders Eclaris (the owner of a 27.47% stake) and Glengary (11.42% stake) from voting at the company’s Jan. 28 shareholder meeting. The meeting was called by another JKX shareholder, Proxima (19.97% stake), in order to replace JKX management. Two weeks ago, the top manager of Eclaris, a company controlled by Ukrainian tycoon Igor Kolomoisky, commented to Bloomberg that he supports Proxima’s view that JKX management should be changed.

In his Jan. 26 comment, CEO of Proxima called the move of JKX board as abuse of power.

The JKX board already used its power in 2013 and 2014 to block the voting rights of Eclaris and Glengary at the company’s AGMs. However, rival shareholders filed legal appeals and the Supreme Court of the United Kingdom ruled to cancel the restrictions on Dec. 2, 2015.

Alexander Paraschiy: With the Supreme Court’s ruling, we believe Eclaris has a good chance to cancel the new voting restriction imposed by JKX management. That means there is a high probability that the company’s board will be replaced soon, despite the current board’s fierce opposition. That will add fresh blood to JKX and will theoretically (but not necessarily) play positively to its value-creation potential. At the same time, we see the existing corporate conflict may negatively affect JKX’s value in the short term. In particular, the current management, understanding its lame duck status, may be inclined to make lot of sub-optimal and/or value-destructive decisions which, in the worst case, might endanger the company’s status of a going concern. We believe the faster the unavoidable management reshuffle happens, the better it will be for the company.