Retail investors oppose Talvivaara’s direct issue plans

Talvivaara (OMX: TLV1V, LSE:TALV) continues to make some progress in its ramp-up efforts. The volumes have risen far slower than had been hoped for. In Q4 (reported last week) the company produced 4 769 tonnes of nickel and 10 524 tonnes of zinc. Net sales were 66.5 million Euros and operating profit 14.9 million, both very slight improvements on Q4 2010. Profit for the period was 3.7 million or 1 cents a share.

What really rattled investors was that the company simply notified it had agreed to sell nearly 25 million new shares for proceeds of 68.8 £ (83 million €) to new and existing shareholders subject to an approval from an EGMto be held on March 12th . The price of one share (3.38 €) was considerably below the stock market price at that point.

Finnish shareholders Association Osakesäästäjien Keskusliitto is collecting proxies to vote against the directed issue. Its Chairman Timo Rothovius told newspaper Kauppalehti that in his opinion retail investors should sell their stake in the company. Since founder Pekka Perä, governments investment arm Solidium Oy and mutual pension funds Varma and Ilmarinen support the issue, meaning over 45% of shares are guaranteed to vote for the motion, the chances of a retail investor protest bearing fruit are slim to none. More than anything, the Association wants to send a message to companies to remember the little guys as well.

A direct issue is often considered unwelcome when there is no clear reason (like a M&A opportunity) as to where the money will be used in. Nordic companies more often do tend to give equal rights to shareholders, although certain industries such as biotech often act otherwise.

Talvivaara has also found a new CEO in Harri Natunen, who will take over the day-to-day reins from Perä on March 19th. He joins the company from Boliden (OMX: BOL) and has an extensive backround in managing mining and metallurgical operations having started at Outokumpu (OMX:OUT1V) Mining Services 30 years ago.

It must be said that following a perfect storm where everything seemed to go wrong, Talvivaara had rebounded strongly closely following the nickel spot price. Before the interim report and the private placement announcement it had climbed over 4 Euros. It has now fallen to about 3.25 Euros, which is still around 20% above the start of the year.