Sea Star shareholder seeks CySEC help to uncover puzzle

The Lesvos Shipping Company holding 2,000 shares in Sea Star Capital Plc (SEAS) has called on the Cyprus SEC to help it force the company to provide details to many questions regarding past activities and future prospects.

A Sea Star representative told the Financial Mirror that the charges have been refuted through an announcement submitted through the CSE.Lesvos makes particular reference to the Prospectus of SEAS that was published towards helping raise EUR 170 mln from private and institutional investors. Lesvos makes particular mention of a transaction last August whereby SEAS acquired 23,495,163 shares of ANEK at the price of EUR2.50 per share at a total cost of EUR58 mln, which represents 14.93% of the total ordinary shares of ANEK, making the Company its major shareholder. The first question asked by Lesvos is how did the company pay for the acquisition of the shares, and if the acquisition was made through a loan, how come this was not mentioned in the Prospectus dated September 10, 2007.

If the ANEK shares are marked to market of November 7, then SEAS has a loss of EUR 8 mln on its stake, which is well above the total share capital of EUR 5.7 mln as stated in the Propsectus, meaning that not only is SEAS loss making, but it has a negative net worth. Lesvos then asks how can a negative net worth company ask for EUR 170 mln and not mention this in the Prospectus, which is enough justification for the CySEC to intervene.

Lesvos then asks for use of the cash to be raised for which there are no details available other than “that it will be actively involved in shipping and extraction of mineral wealth”. It states nothing about the name of the shipping company and the mineral wealth.

Lesvos says the cash will be used for the payment of the loan for its stake in ANEK, as well as for the purchase of a mine company belonging to Ioannis Vardinoyiannis.
Part of the capital of the share capital increase will be used for the payment of 6 ships of RO/RO type belonging to Costas Agapitos, which have been leased by Agapitos to ANEK. The Managing Director in ANEK, however, is Ioannis Vardinoyiannis, who will be the new major shareholder of the Company after the completion of the share capital increase. The conflict of interest and the violations on behalf or the Managing Director are obvious, notes the lawyer representing Lesvos Shipping.
Costas Agapitos is already known in Cyprus for the scandal with Aegean Sun ship, which although it was Greek-flagged, it approached the occupied areas to load goods. For this, he was imposed a fine of EUR5,200,00.00 by the Greek state. What’s the future of this fine? Will it affect the Company and the unsuspicious investors?

In any case and according to the announcement of the same Company dated November 1, 2007, a legal and financial audit is conducted in the owner companies as well as a technical audit on the ships. However, the Company has not announced either the names of the Companies or the names of the ships.
Is it because it intends to pass through the fine to the investors? In any case, this secrecy is not in line with the spirit of the relevant provisions.
The 2 of the 6 RO/RO ships are under the Management of Champion Ferries, which is subsidiary of ANEK. It has not been clarified whether the companies that are under purchase include Champion Ferries as well. These are mentioned in the Prospectus of ANEK SA dated 30.3.2007. Possibly, the issue violates the corporate law. It is worth noting that according to the Prospectus of ANEK dated 30.3.2007 page 75, Champion Ferries accumulated losses of EUR1,284,000 million in 2005. Also, according to the Supplementary Prospectus of ANEK dated 30.04.2007 page 20, the Company was loss-making in 2006 too (EUR1,632,000 million). If the Company will proceed with the acquisition of the 2 ships, there will be a conflict of interest and the Company will acquire a loss-making company. None of this has been mentioned in the Prospectus.
All the above show that the Company’s Management failed to reveal its targets in the Prospectus. They also show that the Company handles its affairs to the benefit of one shareholder. More than that, Amalia Vardinoyianni, sister of Ioannis Vardinoyiannis, acquired 19,358,487 shares at 0.09 cents per share on 29/3/2007, and on 29/6/2007, the same day that the Company announced the participation of Ioannis Vardinoyiannis in the share capital increase as strategic investor, Amalia Vardinoyianni sold her stake. This means that taking advantage of the information that he had at his disposal, he enjoyed profits of EUR6.4 million or 360% in a period of 3 months.
Lesvos notes that SEAS has not announced its nine-month results for 2007 yet. The need to announce the results is acute, since it seems that its economic condition has deteriorated and the investing public must be informed.
At the end of the day, a critical question is: Could a partial expert believe that the publicized documents of the Prospectus represent the reality? The answer is self-evident.
The CySEC is therefore urged to protect the investors’ interests the soonest possible, using its competencies and powers of the Public Offering and Prospectus Law 2005 and the SEC Laws 2001 – 2004. Otherwise, it will leave investors exposed, concludes Lesvos.