In Switzerland companies are required to hold AGMs at least six months after the financial year end, and to produce accounts to shareholders before then. In 2013, 2014 & 2015 the company failed to adhere to this. AGMs are the ultimate governance mechanism for companies, but the board of ALEVO GROUP did not see fit to hold the first series of AGMs until December 2015 – it was far more fun to build your ego having great launch events in the USA than being accountable to your shareholders. Strangely enough, the fact that a Swiss company does not respect basic rules of company laws does not appear to be sanctioned.

It was later reported by the subsequent legal counsel that the problem was that the Board of Directors did not even know if their shareholders’ register was correct, and that this was very much down to the fact Mr Hox did not fulfill his duties[1].

At the series of AGMs shareholders were at last able for the first time to collectively raise their concerns about the company. It was disclosed that the company was running a negative cash flow of CHF 4.2 million per month and there was only CHF 4 million left in liquidity! What had happened?!

Due to illness Jostein was not able to attend the meeting. Mr Hox acted as chairman of the meetings and started trying to explain all the positive elements that had occurred and how far the company had come.

A shareholder remarked that “The auditor’s report is qualified as to “the fact that the going concern is possible only if the shareholders continue to support the company, in particular by making available, when needed, the necessary cash in order to allow the company to assure its current commitments. Failing that, the financial statements must be established at liquidation value.” The Board was asked to comment on how willing shareholders are to continue funding the company, and on what terms? There was not much to say, except that the company was raising money piecemeal to keep operations going.

Subsequent questioning showed that the company had not been able to deliver on any of its financial milestones that had previously been presented in material to investors to justify the sky-high valuations the company had achieved, reaching over CHF 120 per share (about the same in US$).

One shareholder read up the following statement and handed it to the person writing the minutes asking for it to be included: “It appears to me that we are witnessing here a company that is suffering from a crisis of funding which I attribute directly to a crisis of competence within its leadership, most notably with the Board of Directors. This Board has, until today, disregarded on at least two occasions its statutory obligations in giving us shareholders a timely AGM. This is a forum in which to question the strategic vision, identify potential problems and address these in broad agreement.

“There has been the build-up of a colossal money draining machine with not enough funding now to sustain its costs. My advice to any potential investor in the company is to only consider investing new funds if a clear strategy to make profound changes in the composition of the Board of Directors can be implemented and followed-through, making a newly-formed Board of Directors more accountable for the company’s spending and not being afraid of removing frivolous costs with possibly a new business plan.”

In Switzerland shareholder lists are kept confidential and although many of the shareholders present had never met or knew of each other from before a clear consensus started to build up. Mr Hox was summarily dismissed, and a new board would need to be installed, with much greater governance and oversight.

Alan Greenshields, who has worked with Alevo’s battery technology for over ten years already, had thankfully recently been appointed to the company and followed up with a credible presentation of where the company stood with its technology.

Although the company would have been pleased to ram through the 2014 accounts at AGM, covering a whole series of payments of over CHF 12 million to directors and associates as “Professional Fees” (in a direct contradiction to the investor material budgets that had been used to raise funds), a small panic set in at Alevo HQ. There had been some vocal and valid protests at the AGM and requests to have uncomfortable material that was read out included in the minutes. Alevo needed to raise money urgently and had targeted Danske Bank investors. Their due diligence would uncover shareholder concerns from the minutes and so the company went on a charm offensive, even giving untrue assurances, in order to avoid having the damaging material included in the minutes.

A new board was handpicked by the Chairman and presented at an EGM in March 2016. Despite the fact that the company’s biggest problem was in producing the batteries the people appointed mostly had backgrounds in PR and lobbying. In retrospect this was probably a shrewd move by Jostein. With all the previous mistakes that he had made and the poor governance, and not forgetting the many broken promises, it would be useful to pack his board with people who would help to protect him and be skilled at diverting criticism.

At this EGM shareholders were invited to ask questions, and the Chairman promised to give quarterly financial updates to shareholders and to regularly keep shareholders informed. Shareholders received an update in May 2016 stating that “commercial production is starting Q2 2016 with deployment of GridBanks planned for Q3 2016.” The overly optimistic assertions didn’t change with the new board.

Per Dybwad, already a board member, was named as interim CEO, allowing Jostein to “focus on the long-term strategic development of Alevo”.[2] In actual fact Jostein was already establishing his next venture in both Florida and Switzerland – EWL Technologies, together with other prominent people within Alevo, such as Jean-Claude Beney.

In June the Board made a new offer of convertible loan notes with a conversion price of CHF 120 per share. “The facility will have a total frame of CHF 100 million which the Board regards as sufficient to secure the needed level of activity to take Alevo at least till year end including completion of the first manufacturing line, deployment of the first GridBanks, and the establishment of stable industrial production.”

2016 was the only year in which the company respected its obligation to hold the AGM within 6 months of the year end. Jostein was not able to attend due to illness, so Eric Cameron chaired the meeting stating that due to the unwanted attention of a journalist no recordings of the meeting were allowed. The new board had not secured funding from Danske Bank, and had relied on interim financing from certain shareholders. However, as part of the process of inciting these investors into the capital of the company the shares of the company could now be freely traded and did not require the prior approval of the board.

A new issue of shares was to take place at CHF 28 per share with certain rights to partake in further issues at the same price. The issue had been underwritten by companies linked to Rybolovlev who would now become the single largest shareholder and would eventually have a majority of the shares of the company, whilst for now putting two of his people on the board.

Per Dybwad thankfully promptly engaged on a much-needed cost cutting drive which entailed terminating the generous employment and consulting contracts of many of Jostein’s friends. These contracts had been so generous, with one-year termination clauses, that money was still bleeding from the company in quite an unnecessary way. Quietly the company had also changed the signatory powers of the company so that Jostein could no longer singlehandedly sign on behalf of the company.

Despite these setbacks the company proudly declared in its 2015 Annual Report “with the organizational changes in 2015 and the new Board of Directors, we have established the basis for good Corporate Governance, efficient management and internal controls”. The encouraging report continued with “in order to further strengthen other aspects of good corporate governance, the Board also has constituted several committees overseeing that key elements in the management of the corporation. These are: Audit Committee, Governance and Compliance Committee, and Compensation Committee.”

A shareholder asked in the meeting about the number of options the company had issued and at what price? The Board answered, “employee options have a strike price of CHF 71, and others go to CHF 160”. This was never recorded in the minutes. Given the vast amounts of ancillary expenditures to consultants, including related parties, another shareholder asks if the company can give shareholders disclosures of the various expenses going forward. Eric Cameron confirms that “this request will be noted and considered going forward”.

In the November 2016 report to shareholders the company ceased predicting when GridBanks would finally be in firm production. That month, an EGM was held in order to authorize the issue of new share capital. A shareholder enquired as to the company’s financial position, and how much cash there was in the bank account, to which Eric Cameron responded that the company would not divulge such information at this meeting as not all shareholders were present, and that they could therefore not disclose this. This is of course nonsensical as the company is not publicly traded, but a definite pattern of obfuscation and opaqueness was starting to (re)take hold.

One shareholder suggested that regular conference calls with shareholders could be held. The board agreed to this, but subsequently only ever held one conference call which was curtailed to an hour, and this was held in January 2017 in conjunction with yet another cash call to shareholders. In it Jostein proclaimed that he was fit to run the company again and had re-assumed his activities. Many of the shareholders, now having started to know one another, began having anxieties about this as it appeared that the interim CEO had done a much more responsible job and taken some much needed but internally unpopular measures to strive to make the company survive.

This was also the occasion for the company to present its new CFO who made noises about how had previously worked on taking companies public. On this call it was agreed that a summarized list of the share options would be provided to shareholders.

The new CFO followed up on the call by sending out the list. To the surprise of many shareholders the list lastly contained a disclosure that “there is in addition a CHF 10’000’000 option granted to our landlord in Concord at the time of sale-lease-back contract, which are exercisable at 80% of the lowest issue price”. It appears that Jostein’s desire to secure the oversized facility in Concord was so great that he recklessly agreed to sign a “tails you win, heads I lose” option agreement which the company’s legal counsel, despite a request from a shareholder, has never been able to demonstrate that it was valid given the dilution it would cause shareholders. Was this too uncomfortable for the board to disclose a few months earlier when they were doing a CHF 100 million funding round with shareholders and had specifically been asked to disclose all share options of the company, including the strike price?

It later turns out that the company had taken out a 30-year lease at 13.5% on this building, paying $8,000,000 in the first year, increasing by 2% annually. More interestingly, rumors also surfaced that one of the board members, before assuming his post with the company, had personally benefited by at least $3 million as a result of this real estate transaction. In January 2016 the Group sold its investment in Victory Industrial Park, Inc. to Clydemont Finance Ltd for a sum that is undisclosed to shareholders, despite being a related party.

Following the August 2016 revelations, in December 2016 Dagens Næringsliv had come out with a new multi-page weekend article, this time delving into the past of the now majority shareholder, Dmitry Rybolovlev. The journalist had visited the person in Cyprus organising all the trust companies for Rybolovlev. It was disclosed that in the summer of 2016 Jostein had changed the address for his Alevo shares to the same offices as Rybolovlev’s. Almost half the Alevo shares were put into a Cyprus company, Gingerpath, which until then had belonged to the oligarch’s trust, Bolton Trustees.

Papers from the Cypriot registry of companies show that Eikeland had transferred his Alevo shares in exchange for an ownership in Gingerpath, which has equity of almost $1 billion. Papers show that Jostein has managed to have Alevo shares valued at around $500 million without even having delivered a single product.



[1] Dagens Næringsliv, May 3, 2017

[2] Alevo Q1 2016 Report

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