Husband illegally profits $1.8 million from wife’s M&A deal

Tyler Loudon, a Houston resident, has pleaded guilty to insider trading. He made $1.8 million in illegal profits from the purchase and sale of stock market shares.



Loudon’s wife was an associate manager in M&A working for BP. While working from home in December 2022, Loudon learned that BP was negotiating a deal to buy TravelCenters of America, a US publicly-traded company. Loudon purchased a series of options for TravelCenters in December, January and February, without telling his wife.

BP announced the $1.3 billion deal in mid-February 2023. Loudon promptly exercised the options, netting a profit of $1,763,522.

Loudon finally confessed to his wife in April 2023. She immediately notified BP what had happened.

As part of the plea agreement, Loudon has agreed to forfeit the profits. At his sentencing hearing, scheduled for May 17, he faces up to five years in prison and a possible maximum $250,000 fine.

Loudon’s wife no longer works for BP. She joined another Houston-area company in 2023.

https://www.justice.gov/usao-sdtx/pr/insider-trading-husband-illegally-profits-17m-after-using-wifes-private-company

Sable Offshore completes deal for California offshore field

Flame Acquisition Corp, a SPAC (Special Purpose Acquisition Corp) has completed the acquisition of assets from ExxonMobil and has been renamed Sable Offshore.

Sable has bought the Santa Ynex oilfield that consists of 3 offshore platforms located in federal waters, 12 miles off the coast near Santa Barbara and an onshore processing facility at Las Flores Canyon.



The offshore field had to stop production in 2015. A corroded onshore pipeline that runs parallel to US Highway 101 ruptured, releasing 2,934 barrels of oil into the ocean. Plains All American were the owners of the pipeline at the time.

The deal was originally announced in November 2022. At that time, Sable agreed to pay ExxonMobil $643 million. Most of this was being financed by a $625 million loan from ExxonMobil. The loan had a 10% interest rate. It would not be repaid until the earlier of January 2027 or 180 days after production is restarted. Start of production was targeted for January 2024.

Under the revised terms of the loan, Sable has now agreed to pay Exxon $989 million. This includes $140 million of accrued interest and $187 million of property expenses incurred by ExxonMobil since the deal was announced. The loan from ExxonMobil has increased to $764 million (original $625 million plus accrued interest).

Sable now expects costs to restart production to be $197 million, up from the $172 million at the time of the original announcement. The company is now targeting production to start in Q3 2024.

If production does not restart by January 2026, ExxonMobil has the right to take back the assets.

Management

The company is led by CEO and Chairman James Flores, the former CEO of Sable Permian Resources and prior to that, CEO of Plains Exploration and Production. The CFO is Gregory Patrinely, the former CFO of Sable Permian. He also worked in the Oil and Gas division of Freeport-McMoRan, where Mr. Flores also worked for a time.

Flame completed its $287 million IPO in February 2021. Originally, the company had until March 2023 to complete or deal or liquidate. As part the approvals to get extensions to complete the deal by February 2024, shareholders holding $230 million of stock exercised their right to redemption.

8-K – Sable Offshore completes deal

Sterling Infrastructure CFO to retire in 2024

Ron Ballschmiede, the CFO of Sterling Infrastructure, has announced he plans to retire sometime in 2024. No replacement has yet been named.



The company has its head office in The Woodlands. It is involved in the construction of infrastructure (eastern US), transportation (western US) and residential and commercial buildings (Texas and Phoenix). The company has a market capitalization of $2.6 billion.

Mr. Ballschmiede, 68, joined the company as CFO in November 2015. Prior to that, he was the CFO at Chicago Bridge and Iron Company (later taken over by McDermott International).

Since he joined, the company has tripled revenues to almost $2 billion and doubled its employees to 3,200. The stock has increased over ten-fold.

In the company’s press release, Joe Cutillo, the CEO of Sterling, said “We have a succession plan in place. Ron will stay on as CFO until his successor is named and will continue thereafter to ensure a smooth transition.” (AJ comment – If you have a succession plan in place, why didn’t you announce his successor?)

SEC filing – 8-K Sterling CFO to retire

 

FibroBiologics goes public in direct listing

FibroBiologics, a biotechnology company based in The Medical Center, has now completed its direct listing of its stock. It’s the second Houston-area company to go public in the past week,  after Autonomix Medical.

The company chose to go public via a direct listing, rather than an Initial Public Offering. In a traditional IPO, a company goes through a lot of due diligence from the investment bank underwriting the IPO.  The bank agrees to support the IPO price with its own capital, if needed. The price of that trust is a time-consuming process and large fees for the underwriters.



In a direct listing, the company does not issue any new shares and doesn’t use an underwriter. It’s cheaper and quicker but the stock can be more volatile because investors have to do their own due diligence. It’s highly unusual for a biotech company to opt to go public via this route.

FibroBiologics was formed in 2021 and is developing treatment therapies that use fibroblasts. Fibroblasts and stem cells are the only two cell types in the human body that can regenerate tissue and organs.

The company believes that fibroblasts are favorable to stem cells in cell therapy treatments as they do not provoke an immune response and can be non-invasively harvested from a variety of skin donors. However, no fibroblast therapy products have yet been approved.

The company is concentrating on treatments for degenerative disc disease, Multiple Sclerosis and wound healing.

Management

Founder and CEO Pete O’Heeron is a Houston-based biopharma inventor with over 300 patents to his name. He also owned a country music record label for 15 years before closing it in 2019 to concentrate on medicine.

Mark Andersen has been the CFO since June 2022. He moved to Houston from Indianapolis where he was the CFO of the Indiana Biosciences Research Institute.

Opening Trading

Ahead of its direct listing, the company set the reference price at $8. The shares actually opened at $30 in mid-afternoon, before closing at $29.10. The company received no cash from the direct listing. [Update 02-02-24 – After three days of trading, the shares are now $15].

As of September 2023, the company had $10.8 million cash on hand, which should see it through September 2024.

S-1 filing – FibroBiologics

 

 

Autonomix Medical completes $11 million IPO

Autonomix Medical, based in The Woodlands, has completed its $11.2 million Initial Public Offering. The shares will begin trading on NASDAQ under the ticker symbol ‘AMIX’.



The company is developing medical devices to treat diseases involving the nervous system. Its first product is a catheter-based microchip sensor that has the ability to detect and differentiate neural signals with far greater sensitivity than current technologies. It will be used to treat pancreatic cancer paid and pancreatitis pain. The company intends to use the technology on other diseases. Human trials have not yet started.

The company was founded in 2014 in Excelsior, Minnesota by Dr. Robert Schwartz and Landy Toth. They now serve as the Chief Medical Officer and Chief Technology Officer respectively.

The rest of the management team are alumni of Soliton, a company that was developing a device that used acoustic shockwaves initially intended to remove tattoos. The company, based in the Galleria, went public in 2019 and was acquired by AbbVie for $550 million in 2021. The device is to marketed to reduce cellulite.

  • Walter Smith (former CEO at Soliton) is the Executive Chairman
  • Lori Bisson (the former CFO) is the CEO
  • Trent Smith (the former Corporate Controller) is the CFO

The company doesn’t have any revenues yet and estimates that it will need to raise of a total of $50 million to bring the product to initial commercial launch.

You can see the complete list of Houston-area public companies here.

https://www.globenewswire.com/news-release/2024/01/26/2818287/0/en/Autonomix-Medical-Inc-Announces-Closing-of-11-2-Million-in-Gross-Proceeds-from-Initial-Public-Offering.html

 

 

Crown Castle CFO changes his mind and will stay

Dan Schlanger, CFO of Crown Castle, has changed his mind and will now stay with the company. Back in October, he announced he would be leaving the company at the end of March.



But that was before CEO Jay Brown resigned in December, 10 days after activist investor, Elliott Management, called for changes at the company. Tony Melone, a Board member, replaced Mr. Brown, as interim CEO. Subsequently, the company announced a strategic review of its underperforming fiber business.

To help persuade Mr. Schlanger to stay at the company, the Board has granted him 21,085 restricted stock units that will vest in two tranches by the end of this year. At today’s stock price, those units are worth almost $2.3 million. Presumably by the end of 2024, there will be a new CEO in place and there will be actions taken for the Fiber business.

The company also announced that Chris Levendos will revert back to being the COO of the Fiber business. In addition, Mike Kavanagh, the Chief Commercial Officer, was promoted to be COO for Towers.

The day before Elliott took its stake, Mr. Levendos was promoted from being the COO of Fiber to being the COO of the overall company.

Laura Nickel, Executive VP of Business Support, also appears to be out at the company, although this was not mentioned in the press release. She is no longer listed as part of the Executive Management team that Crown Castle included as part of its earnings release.

SEC filing – 8-K – Crown Castle CFO to stay

 

 

Target Hospitality promotes from within for CFO

Target Hospitality, based in The Woodlands, has promoted Jason Vlacich to be its CFO. He replaces Eric Kalamaras, effective immediately. The company said it will approve terms in connection with Mr Kalamaras’ departure at a later date.



Mr. Vlacich joined the company in October 2018 as its Chief Accounting Officer. He started his career with PricewaterhouseCoopers. Mr. Vlacich will receive a base salary of $410,000.

The business originally provided rental modular accommodation to the US fields. It still does that, but almost 75% of its revenue and 90% of its profits comes from government contracts. The biggest is providing housing for unaccompanied minors at a Children’s Center in Pecos in west Texas. Target’s contract is with Endeavors, a non-profit organization. In turn, Endeavors has received a $580 million contract from the US government.

Target has a long history of operating government contracts. It provided logistical services at the 1996 Olympics in Atlanta and operated a cruise ship to support relief efforts in the aftermath of Hurricane Katrina in 2005.

Target was taken public by a SPAC in March 2019 and now has a market cap of $939 million.  Mr. Kalamaras joined as CFO in September 2019.

It is unclear why the company is stating that severance will be agreed later as the employment contract that Mr. Kalamaras signed is very clear. The contract, amended in January 2022, states that Mr. Kalamaras will receive 1x the sum of annual base salary ($427,450)  plus target bonus ($427,450). In addition, he will receive a pro-rated bonus for 2024 (plus his 2023 bonus that, presumably, has not yet been paid).

SEC filing – 8-K – Target Hospitality CFO change

Vroom to wind down e-commerce vehicle sales

Vroom, the online car retailer that has its head office in Houston, is winding down its e-commerce vehicles and closing its one physical dealership, Texas Direct Auto, in Stafford. It will maintain its auto finance company and its vehicle analytics company.



The company went public via a $468 million IPO in June 2020 that priced its shares at $22 and gave the company a market cap of $2.8 billion. The shares peaked at $74 a few months later. In aftermarket trading, the shares are now $0.26.

Vroom has never been profitable and as of September 30, 2023 it had an accumulated deficit of $1.8 billion. Since the beginning of 2022, the business has been producing an EBITDA loss between $50 million and $60 million a quarter.

The company relocated from Manhattan to Houston in 2022 as part of its cost-cutting exercise.

The company had been trying to raise funds to scale the business. However, it faced an impending hurdle in that it has a $213 million debt due to mature in March 2024.

Late last year, the company settled with the state of Texas over allegations that it failed to disclose significant delays in transferring titles to buyers. Vroom agreed to pay $2 million in penalties and $1 million in attorney fees.

Vroom has about 900 employees, not including those employed by the auto finance company. The company occupies 100,000 square feet of office space in the Westchase area. That lease expires in November. The TDA dealership is approximately 58,000 square feet under a lease that expires in September.

Vroom – Press release

Houston-based Aravive to delist and liquidate itself

Aravive, a Houston-based biotech company is to delist from Nasdaq and liquidate itself. Back in August, it announced that its lead drug candidate, Batiraxcept, had failed to meet its primary goal in a Phase 3 trial for patients with platinum-resistant ovarian cancer.



As a result, the company decided to terminate testing for the drug in renal cell carcinoma and pancreatic adenocarcinoma. At a meeting in early October, the shareholders passed a resolution authorizing the directors to liquidate the company if it was unable to raise cash. At that time, the company had about $8 million of cash on hand.

In conjunction with the planned delisting, expected February 8,  the employment of CEO Gail McIntrye and CFO Rudy Howard was terminated, effective January 17. Each will get a severance amounting to one year’s base salary ($510,000 and $395,000 respectively).

Aravive went public in 2018 after it merged with publicly-traded Versartis in a deal that valued Aravive at $39 million. As part of the merger, the company moved its head office from California to Houston.

SEC filing – 8-K – Aravive to delist

Chesapeake to buy Southwestern Energy for $7.4 billion

Chesapeake Energy, based in Oklahoma City, has agreed to buy Southwestern Energy (SWN), based in Spring, for $7.4 billion in an all-stock transaction. Chesapeake shareholders will own 60% of the combined company, which will have an enterprise value of $24 billion.



The deal is expected to close in the second quarter of 2024. After it does, the company will have a new name and its head office will be in Oklahoma City. Chesapeake CEO Nick Dell’Osso will be the CEO of the combined company. No other senior executives were named to leadership roles in the combined business.

SWN is primarily a gas producer with assets in the Marcellus and Utica basins in Appalachia and the Haynesville basin. In recent years, Chesapeake has been concentrating on the Marcellus and Haynesville basins and sold its Eagle Ford operations in 2023. The combined company will be the 3rd largest gas producer in the US, behind Chevron and ExxonMobil

SWN was formed in 1929 in Arkansas as a local gas distribution company. The company began exploration and production in 1943 and went public in 1981.  It relocated its head office to Houston in 2001.

Chesapeake expects to save $400 million from the deal. Most of the savings will come from elimination of corporate and regional costs ($125 million). Reduced capital expenditures in drilling and completion will save $130 million.

This is the second big E&P deal announced in the past week. Apache agreed to buy Callon Petroleum for $4.5 billion.

Investor Presentation – Chesapeake SWN