Any opinions on Ensask investment?

[kamichel]

In the prospectus on dividends it states that holders of preferred shares are entitled to receive, in priority to the declaration or payment of dividends on second preferred shares or common shares, a fixed, cumulative, annual, preferential dividend of $.50 per share.
Is this a typical arrangement??? Seems to me the preferred shareholders since their shares cost 5 dollars will receive 10 percent on their money weather the Ensask makes a profit or not and before any dividends get paid to common shareholders plus they will be entitled to additional dividends that the common shareholders will receive.
TADL Tisdale Alfalfa dehy limitted will be the majority owner of these preferred shares. Earned by charging Ensask 60,000 dollars per month for current management and related services.
Before Ensask's common shares are fully tendered and Ensask can do the work themselves. These prefered shares are also purchased at only 5 dollars per share. TADL will also receive common shares valued at 10 dollars per share for their old alfalfa plant valued at approx. 6 million. Farmer investors can purchase common shares at 10 dollars per share. My question is why should these common shares be valued at 10 dollars while the preferred be at 5 dollars? The preferred 5 dollar shares are the better investment damaging the value of the 10 dollar common shares in my opinion.
Also any opinion on the viability of selling distillers dried grain in pellet form to offshore markets?

[freenorth]

Karmichael the preferred investment was seed capital it pays a 10% dividend but the dividend is not paid until the public offering is completed and the entity is operating and viable. A benefit of putting up the seed capital was obtaining a warrant which gives the shareholder the right to purchase an equivalent capital amount of common shares at $5. Preferred shareholders have preferential rights. I would concur that the incentive to participate as a preferred is/was greater then to participate as a common shareholder.

The entity has some advantages over other new entities. It has operated profitably in the past and has existing infrastructure. Although past performance is no guarantee of success they have infrastructure (office, storage, warehouses, 50 car track), experience operating a plant, and marketing a feed pellet. This gives them advantages over other new entrants. I also have concerns about TADL but these advantages outweigh them.
It's a package and your either for the package or not you don't get to select specific issues and remove them.

As for your question about viability of pelleted distilled grain there seem to be different opinions on the flowability of dried distiller's grain, some claim it is a granular form which will flow others claim and know it won't. A pellet will transport large distances without spoiling and TADL has experience in marketing pelleted feed.
Time will tell as there is a cost to pelletizing it.

[kamichel]

I believe these preferred shares carry additional risk at the start as TADL is doing current work and paying expenses until Ensask has enough common sharedholders. If there are not enough common shares gathered then TADL and others will be out their money. One worry I have is that Ensask will offer double or more preferred shares to TADL for the additional work that they are doing for Ensask. Which would be out of common shareholders control. Just think there is too many preferred shares already offered to TADL, and TADL, I have no problems as far as being able to run the business and being able to give their expertise. They could also give themselves too much power and control.

[freenorth]

If they do not raise enough capital to proceed theoretically they get their money back but I agree it is risk capital. In regards to TADL once they raise the capital and have a shareholder meeting there will be more balance in their governance structure. Rather surprised they didn't deal with this after the seed capital raise.