Wednesday, February 17, 2010

Just Conjecturin’, Part 8: Make That the 83% Solution

A piece at a time, the ownership package behind Excapsa (software-parent holding company for online poker/blackjack concern UltimateBet) continues to fall into place. While this is only a means to an end, as will be brought up in a later post, more and more of the Excapsa ownership picture circa 2007-08 begins to emerge, thanks to information gleaned from court documents connected to the ongoing Excapsa/6356095 Canada liquidation. Said liquidation has taken its own ironic turn in the last 18 months or so, which is yet another post topic on an ever-increasing list of topics to be explored in the months ahead.

A few months back, I cleaned up and re-published a list of known Excapsa ownership entities. All of these were obtained from signed proxies in favor of a switch of liquidators for Excapsa/6356095 Canada. Combining some of the smallest share blocs (less than 100,000 each) into a single clump produces this partial list:

Fred (J.) David -- 1,680,000
Daniel P. Cunningham and Melissa M. Cunningham - 2,085,872
Charles Schaupp (a/k/a Chuck Sharp) -- 3,843,504
Molly O'Hearn Living Trust -- 4,304,728
Jason Karl -- 255,984

Daniel Friedberg and Raywa Friedberg, (JT TEN) -- 331,069
Gerald Fujii -- 443,997
Melissa L. S. Gaddis -- 737,952
Uri Kozai -- 1,200,000
Daniel Friedberg -- 1,360,000

Chomvilai Hanchena -- 2,935,512
Roger K. Gaumnitz Family Partnership -- 3,074,800
The Jack McClelland and Elizabeth McClelland Trust -- 1,229,920
Duane J “Dewey” and Judith K. Weum, JT TEN -- 1,974,800
Fluffhead LLC (Annie Duke) - 2,975,839

Mansour Matloubi -- 3,846,256
Russell W. Hamilton, Jr. -- 4,304,720
Carolyn Heick -- 587,952
Daniel P. Cunningham, Dorothy B. Cunningham (joint tenants) – 130,740
Nicholas M. and Aimee K. Leonard, TEN COMM – 275,000

Omaha Beech Investments LLC (Ted Forrest) -- 4,000,000
The Desert Palm Irrevocable Trust (Ted Forrest) -- 4,304,730
The Clearwater Irrevocable Trust (Ted Forrest) -- 2,085,872
James P. Hendrie – 537,952
(Ida) Susan Albrecht – 922,480
John G. Lowe – 2,774,800
… 20 smaller share blocs of less than 100,000 shares each – 390,049

At least another dozen blind trusts exist as well, designed to shield the identity of the owner(s) of those shares. Eleven of those voted in favor of a corporate motion to replace Excapsa’s original liquidator, with the names and shares as follows.

RBC Trustees (CI) Ltd. (trustee of The Westwood Trust) -- 3,279,792
The Tip Top Irrevocable Trust -- 9,385,822
The Rising Son Irrevocable Trust -- 13,220,816
Manchurian Living Trust -- 1,574,800
The Mountain Ridge Irrevocable Trust – 410,792
The KMJ BelleFountain – 2,128,000
The Tranquility Irrevocable Trust (Close Trustees Cayman Limited TR) – 3,279,784
The Rough Diamond Irrevocable Trust (South Dakota Trust Company, LLC) – 3,384,800
MS Irrevocable Trust – 4,804,720
The Vision Irrevocable Trust – 7,489,323
The Grandview Irrevocable Trust (trustee, Meridian Trust Company Ltd.) – 13,220,816

(total of these 11 blind trusts) – 62,179,345

Among the several individuals who may be among the owners of some of these trusts are original Iovation honchos Greg Pierson and Jon Karl, longtime UB spokesman Phil Hellmuth, and perhaps even one-time Excapsa CEO Jim Ryan, who is now with PartyGaming. Doubtless two or three other notables have yet to be connected publicly as part of UltimateBet’s ownership.

All told, these blocs added up to 113,969,851 shares, or about 56.4% of the total of 201,804,155 shares of Excapsa stock known to exist in late 2006. However, forfeiture actions connected to the UB online cheating scandal resulted in the cancellation of 6,923,272 shares. 4,304,720 match exactly to the known Russ Hamilton bloc in the above list, with an additional 2,618,552 not matching exactly, and being a composite of known blocs or, just as likely, a share amount coming from the remaining 43.6% of the company.

It was frustrating to have names (even blind-trust ones) for only a little more than half of the company. However, continuing court proceedings have exposed more of the ownership bloc to public view. First and foremost is the giant bloc now controlled by Joe Norton’s Tokwiro Enterprises ENRG, which bought into the company under the name Blast Off LTD in the frantic days following the late 2006 passage of the UIGEA. In the complex arrangement, which is referenced in a 2008 letter to shareholders, “approximately 49,300,000 shares of Excapsa were pledged as security for the Blast Off indebtedness.”

There were three possible explanations for the way in which Blast Off’s purchase into or of Excapsa was accomplished, roughly described as follows:

a) Blast Off purchased a separate holding company, obtaining complete control of Excapsa in the process;
b) Blast Off purchased Excapsa itself in its entirety;
c) Blast Off purchased a share of Excapsa.

The truth seems to be somewhere between (b) and (c). If I’m reading the court documents correctly (yes, another future post), Blast Off acquired a bit less than one-fourth of the company in late 2006, (49,300,000 of 201,804,155, or 24.4%, which climbed over 25% when those nearly 7,000,000 million shares connected to UB cheater/owners were annulled). However, Blast Off was to acquire the entire company over time, with monthly payments extending over several years from UB’s ongoing operations. Contingent upon making all scheduled payments, Blast Off would then acquire all shares in Excapsa, or rather 6356095 Canada, its current name.

However, these shares were likely separate from the multitude of owner entities listed above, meaning that they represent another bloc of shares. True, Blast Off may own some or all of the 62.18 million shares in those various blind trusts, but it seems more than likely that somebody or several somebodies cashed out of Excapsa back in late ’06. 62,179,345 minus “approximately 49,300,000” would leave approximately 12,900,000, which doesn’t necessarily fit those blind trusts. One could construct a package approximating all those trusts but three, leaving out The Vision Irrevocable Trust (7,489,323), The KMJ BelleFountain (2,128,000), and one of three from RBC Trustees (CI) Ltd. (trustee of The Westwood Trust), The Tranquility Irrevocable Trust (Close Trustees Cayman Limited TR) and The Rough Diamond Irrevocable Trust (South Dakota Trust Company, LLC). I doubt it's that last one, in any event. Still, it’s just as likely that Norton’s group was either opposed to switch in liquidators or was blocked from voting on the motion for legal/technical reasons. Maybe someday we’ll find out. Assuming it was separate from the known 56.4%, this increases known possible ownership in Excapsa/ 6356095 Canada to a ceiling of about 81.0%.

But wait, there’s both less… and more. When Blast Off payments to other Excapsa owners were suspended and renegotiated in late 2007 and 2008, one of the contingencies of the new deal was that in exchange for reduced payments, half of Blast Off’s original bloc of approximately 49,300,000 was annulled. It was not returned to the original owner(s), who may have gotten out when the getting out was good and perhaps had little desire to reenter the picture. Since Blast Off (Tokwiro) would be paying less to acquire the firm, they should also get less of the company’s year-to-year operating profits. Blast Off therefore agreed to annul half of its own 49,300,000-share acquisition as part of a deal to keep the company moving forward.

Excapsa’s overall share count has dropped by about 15%, from its pre-scandal high of 201,804,155. The adjustments go like this:

Starting point, pre-scandal: 201,804,155

-- (minus scandal-associated forfeiture: 6,923,272)

Post-scandal total: 194,880,833

-- (minus secondary Blast Off acquisition adjustment: approx. 24,656,000)

New total: 170,224,000

The 113,969,851 shares of Excapsa stock originally exposed via published proxies were reduced by either 4.3 or 6.9 million, depending on the origination of the 2.6 million shares not connected directly to Russ Hamilton. This was explored in a previous post, but the answer remains shrouded. Let’s knock off the 4.3 million for sure, and add back in the other 24,656,000 which Blast Off still retains. More math:

Known original: 113,969,851
- (minus Hamilton amt.: 4,304,720)

Known, post-scandal: 109,665,131

+ (adjusted Blast Off shares: 24,656,000)

Known 6356095 Canada (Excapsa) stock: 134,321,131

That’s something on the order of 78.9% (134,321,131 of 170,224,000) which can possibly be accounted for, and yet we can add in still more. One other blind trust and its share amount can now be added in, due to its detailed mention in other liquidation documentations. Among those I mentioned as also being connected to ownership but without a fixed amount was a group named “Fundamentals”, with the names Peter Collery and Peter Case being tied to it. By all appearances this bloc’s owner was vehemently against the change in liquidators, and filed a motion to try to have change stopped to no avail. Nonetheless, another of the Excapsa/6356095 Canada liquidation documents notes the trust’s proper name as being “SC Fundamentals”, and notes it controls approximately 7,000,000 shares.


Known 6356095 Canada (Excapsa) stock: 134,321,131

+ (SC Fundamentals shares: approx. 7,000,000)

Revised known 6356095 Canada (Excapsa) stock: 141,321,131

This represents as much as 83% (141,321,131 of 170,224,000 shares) that can now be tied to various entities. It sounds impressive, but the exact ownership of as much as half of the original blind trusts remains hidden. Peeling this onion is an ongoing process for sure.

1 comment:

Daniel said...

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