Spoiled by the mother

The hexagram 18 Ku / Work on what has been spoiled [Decay] depicts what has been spoiled through man’s fault can be made good again through man’s work. It is not immutable fate that has caused the state of corruption, but rather the abuse of human freedom. Work toward improving conditions promises well, because it accords with the possibilities of the time. Success depends, however, on proper deliberation. [W/B]

A few months ago, the Yi answered my question, on whether to invest more into a public listed company (PLC), with a moving line two of the hexagram which changed it to Hexagram 52 Ken / Keeping Still. At the time of the question the shares were quoted at 22.5.

The PLC had undergone a major capital restructuring exercise in 2003 whereby it issued shares priced at 70 and traded off non profitable assets in exchange for a huge piece of development land in a choice location and a profitable business. On completion of the exercise the original owner of the land, a corporate entity, became the holding company (mother) but somehow its chief executive officer (CEO) came to own 55.5 million of the new shares. (There were no explanations how he got the shares and at what price from the holding company.) In a reshuffle early 2005 the CEO was removed from the Boards of both companies. The PLC subsequently announced a quarterly loss of 29 million.

Line two of hexagram 18 says:
Setting right what has been spoiled by the mother, one must not be too persevering.

This refers to mistakes that as a result of weakness have brought about decay. In setting things right in such a case, a certain gentle consideration is called for. In order not to wound, one should not attempt to proceed too drastically. [W/B]

With the clear answer from the Yi (including Keeping Still), instead of buying more of the PLC shares, one had reduced the investment by a third with some losses. After his removal from the Board, the CEO has regularly disposed his shares at lower prices not only depressing the share price but created an overhang because he still holds about 45 million shares. (He certainly has money to burn if he had paid 70 for each share.) The shares were sold down to 14 (lifetime low) recently and are now hovering at 15.

Indeed the PLC and its share price have been spoiled by the mother!