Saturday, July 8, 2017

CYAN is a Captive Subsidiary of the Davis/RSF Nonprofit Partnership

"Emperor for Life" Idi Amin Dada
Is it an accident that Cyanotech badly underperforms as a publicly-traded stock?  Isn't the company doing exactly what "Chairman for Life," Michael Arlen Davis (MAD), wants the company to do - and that is to operate as a captive subsidiary of the nonprofit partnership MAD has created with Rudolf Steiner Foundation (RSF)?

MAD and RSF began working together to acquire their 33% "group" interest in Cyanotech in 2010, but they began working together as partners nearly 10 years earlier with their first project, owning and operating Filigreen Farm.

The purpose of the MAD/RSF partnership is to for each to assist the other in pursuing their shared Steinerite agenda.  Pursuing and promote the ideas of its namesake, Rudolf Steiner is the sole reason RSF exists.   RSF has no interest or reason to pursue profits on its "investment" in Cyanotech - it lives off the donations of its charitable sponsors.  It isn't even possible for RSF to earn a profit, all the shares it holds were paid for by MAD and are subject to written agreements providing that the benefit of the shares it holds revert back to another entity controlled by MAD.

Read More: The Davis web of Non-Profits

RSF's is actually breaking its own rules by working with MAD on Cyanotech.  In 2011, RSF announced publicly that it would no longer hold positions in public company stocks. RSF is breaking this policy in a very big way with Cyanotech.  It is not just a public company, Cyanotech is probably the largest stock position RSF has ever held, it is probably represents the longest period RSF has ever held a stock, and it is the only time RSF has ever held more than 5% of a public company.  With a current 16.2% ownership position, Cyanotech almost certainly stands alone as an extremely unique investment situation for RSF.

So, what is RSF thinking? Most likely that Cyanotech is a wonderful extension of RSF's partnership with MAD at Filigreen Farm. Cyanotech is the second jewel in the partnership's crown - the first a vineyard in the rolling Northern California hills of Mendocino County, the second an algae-grower located on the sunny Kailua Kona coast of the Big Island of Hawaii. What wonderful places these are to promote the Steinerite agenda of biodynamic farming! MAD is a huge donor to RSF and thus, obviously, very supportive of its Steinerite agenda.  This fact is further proven by MAD's--long partnership with RSF to jointly develop and own Filigreen Farm-- as a biodynamic demonstration project.

Now that it has been exposed, the agenda of MAD and RSF at Cyanotech is obvious.  As is the explanation for the extremely poor performance of Cyanotech under MAD's leadership. Cyanotech is not being run as a for-profit public company, it is being run as a captive subsidiary of the nonprofit partnership of MAD and RSF.

It is unbelievable that MAD and RSF thought they could get away with this.  It is not allowed for affiliated nonprofits to own more than 20% of an operating business.  It is not allowed for parties working together as a "group" at a public company to fail to disclose that fact.  It is not allowed for a company to withhold from its shareholders material information such as a Steinerite agenda affecting performance.

Ultimately, what is most amazing about the situation at Cyanotech is the directors that are doing nothing to protect the interests of the company's outside shareholders.  Initially, it could be rationalized that they just didn't know any better - but now one has to ask whether their inaction, their refusal to act as proper fiduciaries, doesn't indicate they are complicit with the MAD/RSF agenda.

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