Premier Exhibitions – Shareholders Question Premier Merger, Stunned That Chinese Graft Suspect’s Daughter Sourced $1MM by Andrew Shapiro

Here is the latest article on the developing story on the questionably-sourced financing of privately held Dinoking and its affiliated investors’ proposed merger with and share issuances from Premier Exhibitions. It includes quotes and actions from Premier’s two largest independent shareholders, my firm (Lawndale Capital Management) and PRXI 13D filer Gregg Schneider.

Lawndale has communicated its concerns to the SEC, requesting the proxy for the merger vote provide additional disclosure addressing what is to or may become of the questionably sourced $1MM of merger financing (or any additionally discovered questionable funding) which would otherwise receive newly issued equity and control of PRXI.

‘Titanic’ shareholders cast doubt over merger, stunned that Chinese corruption suspect’s teenage daughter, Linda Ching, is financier

Two largest independent shareholders demand clarification from Nasdaq-listed Premier Exhibitions over SCMP’s revelations that graft suspect Michael Ching Mo Yeung’s daughter is US$1m backer of merger with Dinoking Tech

Shareholders in Premier Exhibitions, the US firm that owns salvage rights to the Titanic, have cast doubt over the firm’s impending merger after the South China Morning Post revealed that one of the financiers of the deal is the teenage daughter of Chinese corruption suspect Michael Ching Mo Yeung.

Premier Exhibitions’ two largest independent shareholders have demanded an explanation from the Nasdaq-listed company ahead of a crucial October 29 vote on whether to approve the merger with Canadian firm Dinoking Tech.

Gregg Schneider, the largest independent shareholder, said he was “outraged” after learning of the involvement of Vancouver university student Linda Ching, brought aboard as one of four investors by Dinoking.

Fellow shareholder Andrew Shapiro said he had forwarded the Post’s report to the US Securities and Exchange Commission.

Dinoking and its boss, Vancouver-area businessman Bao Daoping, brought in Linda Ching as a US$1 million investor as part of efforts to shore up cash-strapped Premier, which has struggled to monetise its key asset, a trove of 5,500 Titanic artifacts it has had valued at more than US$218 million. If the deal proceeds, Bao takes control of the merged firm.

The Post this week reported that Linda Ching was the sole director of a numbered Canadian company, 1030443 BC Ltd, that transferred US$1 million to Premier Exhibitions on April 2, less than a month before China’s pursuit of her father for alleged corruption was made public. The Post does not have evidence of Michael Ching’s guilt or innocence, and nor does it suggest wrongdoing by his daughter, aged 18 at the time of her investment.

Shapiro, whose Lawndale Capital Management holds a little under 5 per cent of Premier Exhibitions, said shareholders deserved clarification about Linda Ching’s financing role. “Clearly, Lawndale would give careful consideration to any alternative bid for all or part of the company,” he said, adding, “we were obviously disappointed to see the news [about Linda Ching’s investment].”

The other investors in the deal are a named individual whose identity the Post has been unable to confirm and two companies registered in the British Virgin Islands, where ownership can be kept secret.

Shapiro said he sent the report about Linda Ching’s role in the deal to the SEC so that it could review the completeness of Premier’s disclosures to shareholders ahead of next month’s special meeting on the merger. He added: “I think this information coming to light clearly shows the company needs to be more transparent about the investor group.”

See full article here.

Useful Links:

September 2, 2015 story on the investigation that turned up the questionable source of financing

‘Titanic’ investment by Chinese corruption suspect’s teenage daughter is revealed

http://www.scmp.com/news/world/article/1854626/titanic-investment-chinese-corruption-suspects-teenage-daughter-revealed

Premier’s most recent (August 28, 2015) amended Preliminary Proxy for October 29, 2015 Special Meeting to vote on proposed merger and share issuances privately held Dinoking and its affiliated investors

http://www.sec.gov/Archives/edgar/data/796764/000117184315004932/gffprer14a_082815.htm

Transcript of April 9, 2015 PRXI conference call discussing proposed merger

http://www.sec.gov/Archives/edgar/data/796764/000117184315001925/exh_991.htm

On this call, Lawndale Capital Management, one of Premier’s largest independent shareholders, expressed concerns with

  • the then lack of audited financial statements for Dinoking,
  • the initial dilution of the proposed transactions,
  • the potential for incremental dilution created from poorly structured and misaligned contingent acquisition consideration, and
  • Premier Exhibition’s proposed corporate governance, or lack thereof, with a Dinoking-controlled board once the proposed to-be-issued shares effect a change of control of Premier.

Premier Exhibitions