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Life on the ASX hasn’t started well for wireless internet provider Uniti Wireless (ASX:UWL): shares are down 26 per cent on the offer price of 25c and it has just had to answer a please explain from the ASX over why it sacked its two co-founders one day after listing.
Uniti debuted on February 13 after raising $13.2 million of the $18 million it hoped for in its IPO. It was co-founded by Sasha Baranikov, also the chief operating officer, and Che Metcalfe, also the chief technical officer. Shares opened at 33c but have since slid to 18.5c.
But within 48 hours Ms Baranikov and Mr Metcalfe had “ceased employment” with the company, effective immediately.
The company released a secondary, more detailed announcement, explaining that their employment had been terminated by the CEO, Michael Simmons on February 14 as part of the “rationalisation and integration of the FuzeNet business acquired on February 11 and the Uniti business”.
“This is a change identified by the CEO and is a decision made as part of the rationalisation of two businesses,” Peter Wildy, company secretary, wrote. “Rationalisation and integration could not commence, until after the completion of the acquisition of FuzeNet and the listing of the company on the February 13.”
Ms Baranikov tweeted about her about her situation on February 14:
Thankyou to the team, people both past and present for helping the Company achieve this important milestone in it's journey. It's been a big week. Here's to a bright future for the Uniti group ASX:UWL $UWL https://t.co/HioYqX3nJP
— Sasha Baranikov (@SashaBaranikov) February 14, 2019
This was despite the fact that, in its prospectus, Uniti said its board, of which Mr Metcalfe and Ms Baranikov were members, had an “appropriate range of independence, skills and experience” and that directors had “indicated that they are able to devote sufficient time to their duties”.
The ASX wrote to Uniti on Thursday last week, asking it whether its explanation would pass the pub test, in particular whether it had considered sacking Mr Metcalfe and Ms Baranikov prior to listing.
“The announcement states the termination is part of the rationalisation and integration of the FuzeNet business acquired on February 11, however, UWL was aware of this impending acquisition given that the prospectus stated UWL’s admission to the official list was conditional on the completion of the acquisition of FuzeNet,” Belinda Chiu, listings compliance at the ASX, wrote in a letter publicly available on the ASX website.
In a long-winded response also now publicly released by the ASX, Uniti wrote that Mr Simmons advised chairman Graeme Barclay on February 12 that the termination of Messrs Metcalfe and Baranikov was “in the best interests of the company and necessary to enable the commencement of the rationalisation program he had developed, including the need to implement change rapidly”.
Over February 12-13, Mr Barclay sought legal advice on the implications of Mr Simmons’ decision while Mr Simmons met with either Kathy Gramp or John Lindsay, both independent non-executive directors, to explain his decision “in greater detail”.
By the evening of February 13, Mr Barclay had informed Mr Simmons that Messrs Gramp and Lindsay supported the decision to sack Mr Metcalfe and Ms Baranikov.
Mr Metcalfe and Ms Baranikov were then handed their marching orders the following day, after the market closed. The pair also had their directorships revoked because Uniti’s constitution forebode them from continuing as executive directors. They remain significant shareholders with around a 13 per cent holding, with their shares escrowed for two years.
Uniti said it therefore had no need to foreclose the terminations in its prospectus and was in compliance with ASX listing rules.
The company now has only three directors, Mr Barclay, Ms Gramp and Mr Lindsay, which is the minimum amount required for a public company by ASIC rules.
It says it will consider its board composition and vacancies in “the near future”, but did not specify when.
Stockhead has approached Mr Metcalfe and Ms Baranikov for comment.