Monde Nissin ownership group offers to personally backstop Quorn losses for 10 years, but...

Monde Nissin [MONDE 7.90 unch; 79% avgVol] [link] announced a bizarre and remarkable commitment from Henry Soesanto, MONDE’s CEO, and the rest of MONDE’s controlling shareholders, to offer a one-time cash “top-up” to reduce the net cumulative impairment of Monde Nissin Singapore Pte. Ltd., MONDE’s wholly-owned subsidiary that holds MONDE’s struggling alternative meat business. The commitment will begin for any impairment starting in FY23, and carry through for 10 years for any impairments through FY32, with that one-time payment coming on or before June 30, 2033. The amount of this commitment is capped at 12% of the value of MONDE’s outstanding shares, based on a weighted average of the last five trading days of 2032. The commitment will automatically expire if MONDE ceases to control the entities holding MONDE’s alternative meat assets. The amount of the commitment will also be pro-rated if MONDE retains control of the alternative meat assets but sells a portion of the business to another investor or group of investors. As of yesterday’s closing price, the value of the shares pledged is approximately P17 billion.

MB bottom-line: This one is absolutely wild to me, and I’m not really sure what to think about it. On the one hand, this is a great example of “put your money where your mouth is”, with Mr. Soesanto and the controlling shareholders effectively betting on their alternative meat vision with a portion of their stake in MONDE as that bet. The controlling shareholders probably thought of this as a way to calm the nerves of MONDE shareholders who have watched the alternative meat business plummet in value.

On the other hand, though, the loopholes in the commitment have me questioning who the audience is for this stunt. This isn’t a year-by-year top-up where the controlling shareholders make up for the alternative meat business’ impairments in cash payments at the close of each fiscal year: they’re only doing a one-time payment after the 2032 Annual Report is produced. What happens if they rack up tons of impairments from 2023 through 2030, and sell the alternative meat business in 2031? According to my understanding of this commitment, the loss of control