Aegean Marine Petroleum (NYSE: ANW), founded by Dimitris Melissanidis and the shares of which trade on the New York Stock Exchange, has recently been the subject of intense criticism by analysts and shareholders.

The stock price of the company has declined sharply since the beginning of the year, losing almost 50% of its value, and since the beginning of 2017 as the share price has dropped by almost 80%. The sharp decrease in the stock price is attributed to continuing concerns about corporate governance and management efficiency due to extensive transactions with Mr. Melissanidis and other related parties as well as its particularly detrimental investments.

In December 2017, the company’s shareholders representing more than 12% of Aegean Marine Petroleum shares – led by Tyler Baron, Sentinel Rock Capital's portfolio manager – announced the creation of ‘The Committee for Aegean Accountability’, while at the same time published a letter condemning the policy and actions of the company. Among other things, the committee accuses the Aegean Board of Directors of incomplete and problematic corporate governance, as well as problematic financial and operational management, and also points to the Board's ongoing conflicts of interest that have resulted in shareholders value destruction.

The letter is particularly damning, stating that the Board of Directors of Aegean is more interested in consolidating and strengthening its own position than in cooperating with its shareholders in good faith in order to make the changes that are required to improve corporate governance and company performance.

They say that shareholders are stunned and disappointed by the statement of the board’s intention to reduce the number of members to four from seven, which will weaken the shareholders’ position and limit their ability to seek representation in the Board of Directors. To this end, the committee has announced its intention to propose a group of four candidates for the board of directors for their election at the annual shareholders meeting of the company in 2018.

Particular mention is made of the ineffective corporate governance of Aegean. At the end of 2017, the shareholders of the company were represented by only four of the board members in a total of seven, although the company’s shareholders base was comprised nearly entirely of U.S. holders at that time. Additionally, three of these members were appointed by the founder of the company, Mr. Melissanidis, at the time of the public listing of the company on the New York Stock Exchange. In addition, Mr. Spyros Fokas, one of these original members of the Board of Directors and General Manager of the Company, continues to maintain close ties with the founder of Aegean, acting recently as deputy chairman of the Greek gaming monopoly (OPAP), which is partly owned by Mr Melissanidis.

In a new letter published on February 19, 2018, the Chairman of The Committee for Aegean Accountability said among others: “The Board’s troubling history of related party transactions that benefit founder Mr. Melissanidis at the expense of shareholders makes us gravely concerned that the Board’s silence means it is contemplating a transaction designed to dilute shareholder influence at Aegean.”

Shares sale by Mr. Melissanidis

In light of the above, the sale of the shares by Mr. Melissanidis on 19 September 2016 is of particular interest. Specifically, Aegean Marine purchased 11.3 million shares owned by Mr. Melissanidis for $99.6 million at $8.81 per share. This transaction is noticeable for two reasons. The first is that the price of the Aegean share, which had dropped to $5.23 in July 2016, increased to more than $10 in less than two months, increasing by about $5 or 100%, therefore enabling Mr. Melissanidis to sell his shares at a high price and as such earn a particularly high amount.

Also importantly, the stock eight months later declined to $5.10. The second point of interest is that the use of Aegean Marine’s cash for this transaction led the company to violate its borrowing base covenant only a few months later, and the subsequent liquidity crunch was cured by a dilutive convertible bond offering which drove the share price down further.

Hellenic Environmental Centers (HEC) Acquisition The latest hit to the shareholders of Aegean Marine came with the return of Mr Melissanidis to Aegean Marine through the sale of his company Hellenic Environmental Centers (HEC) to Aegean. This transaction seems to be the one that was of concern to The Committee for Aegean Accountability.

The acquisition, as expected, was treated with particular mistrust by shareholders, which was reflected in the share price since the share price fell by 38% following the announcement of the acquisition. Tyler Baron, head of The Committee for Aegean Accountability, noted that the company issued the largest amount of equity ever issued for any transaction at the lowest price in its history, in order to conclude its acquisition it, which resulted in giving control of the company to Mr Melissanidis.

Mr Baron noted that Aegean will also turn over $200 million of its outstanding accounts receivable to Mr Melissanidis, while Aegean could have used that money accretively to fully retire an outstanding convertible note. Financial analysts have also voiced serious doubts about the reasoning of HEC’s acquisition and the high consideration paid. In an analysis by the US investment bank Stifel, analyst Benjamin Nolan, who covers Aegean’s U.S. listed shares, reports that while it was estimated that "Aegean was making strides to improve capital structure, corporate governance, and return on capital, that is clearly not the case and we can no longer recommend buying”. Impressively, Stifel’s report notes that "they see so many violations of shareholder trust in Aegean’s decision to buy Hellenic Environmental Centers that it is hard

to even fathom how any transaction could possibly be worse. “This acquisition, according to Stifel is very negative from every aspect”. In brief, Stifel notes that a) they are issuing equity at the worst possible time, b) they are issuing that equity to the one person in the world the company should most avoid dealing with and c) they would be paying at least 300% more than even a conservative fair value.

Tradewinds, a shipping industry newspaper, reported that shareholders are considering appealing to the US courts and the SEC to investigate this transaction, which the Stifel analyst described as the “one that takes the cake” in terms of questionable deals experienced in shipping and “there is no close second.”

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