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OCT Co-Founder Publishes Scathing Letter Accusing Directors of ‘Serious Governance & Management’ Failings Ahead of GM Vote to Oust Board

GAVIN Sathianathan, a founder member of Oxford Cannabinoid Technologies (OCT), published a bombshell letter to fellow investors last week laying bare the numerous reasons behind his call for the company’s board to be replaced. 

The six-page document details what Mr Sathianathan describes as a ‘series of regulatory and governance failings’ for which he believes ‘sweeping changes’ need to be made in order to rectify. 

It came after he called for a general meeting, understood to be taking place on April 6 2022, for shareholders to vote on the removal of six of OCT’s current board members and replaced by three new candidates.  

In an RNS published on Friday March 11, a day after the letter was made public, OCT said it was ‘already in receipt of irrevocable undertakings’ from 46.5% of shareholders to vote against these proposals. 

With around 30% of the entire company’s shares represented by co-founder Neil Mahapatra and early stage investors Imperial Brands, both of which stand to lose their seat on the company’s board, Mr Sathianathan says ‘there are other shareholders who would like to make clear their grievances and offer their constructive support to the Company’.

OCT are expected to publish a formal reply to this letter, which has now been removed from the public domain, in the coming days.

Board Composition

The bulk of the letter focuses on the current board members’ performance since the company listed on the London Stock Exchange last year, accusing them of ‘serious governance and sclerotic management issues’, and failing to meet the goals laid out in its IPO prospectus. 

First of all, it targets Mr Mahaptra and sheds new light on the deal made between his company Kingsley Capital Partners (KCP) and the bank Brown Shipley. 

KCP entered into an agreement to pledge nearly 200m ordinary shares it held in OCT against a £1m loan from Brown Shipley in July, a deal Mr Mahapatra reportedly failed to inform the board of. 

The board was only made aware of this deal, which breached a lock-in agreement made two months earlier, in October by a new potential broker who was carrying out due diligence. 

Oxford Cannabinoid Technologies (OCT) published its interim results this week reporting ‘good progress’ on all of its key development programmes, but its stock price was dragged down once again following fresh controversy among its board members. 
Neil Mahapatra, Dr. John Lucas, Clarissa Sowemimo-Coker, Karen Lowe, Gavin Sathianathan, Valentino Parravicini.

Despite the ‘severity of this transgression’, Mr Sathianathan criticised the board’s reluctance to punish Mr Mahapatra ‘adequately’, instead keeping him on as a non-executive director on a salary of £25,000 per year. 

In a similar vein, he criticised the board’s decision to reappoint Bishrut Mukherjee to the board in November 2021, ‘despite his obvious lack of experience’. 

Mr Mukherjee, who is understood to have had no PLC board or pharmaceutical experience, was appointed to the board in January 2020 to represent Imperial Brands 10% stake in the company after his predecessor resigned. 

After stepping down from Imperial Brands in September 2021, meaning he no longer represented the interest of a major stakeholder, he requested to stay on as a board member. 

This request was approved in a vote consisting of just 45.2% of shareholders, over 30% of which was made up of KCP and Imperial Brands, seeing Mr Mukherjee now receive £25,000 a year from OCT which he did not before. 

When Mr Mukherjee resigned from Imperial Brands, it appointed Richard Hathaway to represent its interests in the OCT, which means 25% of OCT’s board now consists of current or former big tobacco employees. 

According to Mr Sathianathan, this is ‘not appropriate for a company that is focused on pharmaceutical drug development’, while the board’s eight-member size is ‘wholly excessive for a company of OCTP’s size’. 

Stock and Investment Concerns

OCT’s stock price, which has recovered from historic lows of 1.2p following the release of the letter, now trading at around 1.45p per share, was another main focus. 

In its most recent financial update, OCT said that it had around £12m in the bank left over from its initial fundraise which it expects to be used up entirely over the next 12 months. 

As a company which plans to begin generating revenues in 2027, its plan has always been to raise more capital as it progresses through to the next stages of its drug trials. 

This process has, according to Mr Sathianathan, been made considerably harder as a result of the board’s actions, and the subsequent reputational damage to the company. 

Foremost is the fact that OCT is currently still without a broker, and essential part of bringing in external capital, after States Bridge Capital departed in November following the KCP deal. 

It is understood that Mr Sathianathan was responsible for bringing States Bridge Capital on board to guide OCT through its IPO. 

Industry sources speaking to BusinessCann suggested that there was also little interest in the City to work with OCT. 

They also suggested that many investors, who had invested in OCT in good faith between June and October 2021, were angry that the market breach had taken so long to come to light, adding that they would have not invested had they known there was a pledge in place. 

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