It’s not uncommon for shareholders to disagree with the boards that are supposed to represent their interests. Directors are privy to a lot of inside information that isn’t available to the public. They make decisions that can’t be divulged, sometimes forever. They balance risks against potential gains in initiatives that don’t always produce the desired outcomes. Agendas must sometimes be hidden if they are to have any chance of success.

What is uncommon is for hundreds of complete strangers, who have only ever interacted anonymously through social media, to band together and mount a concerted shareholder campaign to defeat a takeover bid that has been unanimously recommended by their board.

This is exactly the situation confronting the board and the shareholders of ResApp Health. As reported by Samantha Freidin, Pfizer has made a bid to acquire ResApp in an all-cash offer of 11.5 cents per share. This represents a healthy premium to the share price in the lead-up to the announcement on April 11^th.

The board professes to be very happy with the offer, and cite the prevailing market price of around 8.5 cents immediately prior to the announcement. In contrast the shareholders have pointed to the need for a capital raising within six months, uncertainty over the lead time to trial and commercialise the new Covid19 test, and the unknown revenue from recently initiated commercial agreements as factors behind the relatively depressed prevailing share price.

In fact the takeover announcement also contained an offer of funding from Pfizer and a timeline for development of the Covid19 test. So information that almost certainly would have fuelled a higher share price was not available to the market until after the takeover price had already been set.

Adding to the confusion is the form of the offer: a Scheme of Arrangement. These are miserable things, originally intended to be used for takeovers of companies at the end of the road. Creditors might use a Scheme of Arrangement to take over a company rather than breaking it up and selling the assets. A company might use one to take over a competitor or supplier facing insolvency. Generally a Scheme of Arrangement says to shareholders, “this is best you can hope for, take the crumbs or lose the lot.”

But ResApp was in no such state with six months of working capital and well over a dozen commercial, pilot, trial and partnership projects in play for their primary product before the Covid19 test results were to hand. The Covid19 study results were also outstanding. Far from being at the end of the road, ResApp Health was at the starting line with the engine running, wanting only for a little extra fuel in the tank.

So the mystery here is why the board would agree to a Deed of Implementation that binds them to not only unanimously support the Scheme, but also to make every effort to promote the scheme to shareholders, to lobby for shareholder support, and to comply with any reasonable request Pfizer might make to support the takeover. In effect the directors have agreed to have their hand tied behind their backs and their lips stitched shut. At a time when shareholders require clear, open, balanced communications from their board the directors can only say, “it’s a good deal”.

But amidst all the uncertainty some things are clear. Firstly, there is much more behind the scenes at the board level than we will probably ever know. Secondly, the level of drama at play here would do credit to any screenwriter’s abilities.

And finally, there is a great deal of breath being held by a great many stakeholders at Pfizer, at ResApp, and amongst the shareholders.