As previously disclosed, we believe Ominto Inc (omnt) has engaged in questionable activity, has a vastly overvalued stock price (trades at 9x revenue and loses money) and has a terrible business model.
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If that weren’t bad enough, it appears one of OMNT’s largest shareholders was convincted. More importantly, while it was not widely disclosed, we believe this same shareholder was also a large shareholder in Lani, a company OMNT curiously invested in at a $25 million valuation even though we believe Lani was essentially worthless at the time. (See our story on this investment here).
According to the Google translate version of this Danish article (from a respected news media corporation in Denmark) Mr. Ole Abildgaard was sentenced to four months conditional prison for giving false and misleading information to the Danish Financial Supervisory Authority. Giving false and misleading information to a government authority sounds rather serious to us. (Note: since we are relying on a translation of the article, we encourage all readers to read the original story).
However, a fluent Danish speaker translated it to us as follows:
Headline: Two out of three Samson directors were sacked Subtitle: After almost 100 hearings, two out of three executives from the cracked Samson Bank were sacked after a series of serious charges yesterday in the city court. Financier Ole Abildgaard had four months' imprisonment. The prosecutor makes it clear that the judgment about Abildgaard is serious. In the financial world, the four-month prison is comparable to a parking fine.
1st paragraph body: the defendants and their defenders had a great smile and the relief was enormous when judge Lene Larsen read the verdict for the three former directors and owners of Samson Bank.
Besides being convicted, Abildgaard has also been involved with two U.S. listed companies, DanDrit Biotech USA, (ticker DDRT) and Liqtech International (ticker LIQT) whose stock performance (in our opinion) has been incredibly disappointing.
According to OMNT’s 2016 10k, an entity controlled by Abildgaard beneficially owned approximately 5.9% of OMNT. Buried deep in an SEC document is the disclosure that Abildgaard also appeared to have owned 10% of Lani. Therefore, we believe OMNT’s investment in Lani may have been a “related party” transaction and we wonder why OMNT did not more prominently disclose Abildgaard’s involvement in the deal and the potential conflicts of interest.
Abildgaard’s questionable track record as well as his ownership in both OMNT and Lani raises many serious questions particularly since we see no financial or strategic rationale for OMNT’s investment in Lani. Our questions include:
- How involved in the Lani transaction was Abilgaard?
- Was OMNT’s disclose adequate regarding this potential related party transaction?
- Did Abilgaard receive any other benefits or compensation for this deal?
- Did OMNT get a fairness opinion for this investment, and if not, why not?
We believe the SEC, Nasdaq or other regulators will inevitably take action against OMNT because we believe the questions are blatant. The only question we have is will regulators act before or after OMNT (i) does a (in our opinion likely) dilutive equity raise or (ii) is (in our opinion likely) forced to write down the value of its recent Lani and Quant investments.
