#NEW – Don’t worry be happy…
There are lots of rather silly bits of speculation about
motives, conspiracy theories etc on the BB’s. I would urge investors to
concentrate on the facts and what might realistically happen.
- Private Investors won a fantastic victory with a NO vote for the cheap BOD shares and a NO vote for the placement shares.
- Cornhill has not been given 2.5bn shares it can happily give to its clients or to those that thought they had participated in the placement.
- The BOD know that a majority of shareholders are very unhappy with them, that those shareholders are now a sizeable cohesive block.
- The shares are suspended until the market can function correctly and shares can settle.
With 2 billion shares needed in the market, (we know this
number as most brokers only have between 10-40% of shares settled), we know
that the market can absorb 2bn shares without it effecting anything at the
moment.
The only place these extra shares could have come from, are
from short positions taken out by folks who thought they have guaranteed
shares, but instead have simply taken out naked shorts to the tune of 3 times
of the current share base.
If every share currently in circulation was brought by
Cornhill and the other brokers it would still leave a shortfall of 1.3bn shares.
This would obviously require a very high price to be paid.
The LSE are saying then that the shares will be suspended
until and unless they get a guarantee of at least 1.3bn shares entering the
market.
The only way the new shares can enter the market is either
through a placing (which would need a vote) or an open offer.
No investors like to see their ability to buy or sell taken
away from them, but we need to look at the bigger picture. For current
investors we have a few things to think about.
How many shares will
be issued?
Who will the shares
be issued to?
At what price will
the shares be issued?
With regards to how many shares, the fewer shares issued the
better, however even if 2.8bn shares are issued, the answer to the other two
questions will determine how good or bad this is to investors.
The shares will be/must legally be, offered to current
shareholders first. Only after this will the leftovers go to Cornhill, or
whoever NEW use to underwrite the offer. Current shareholders will snap up most
of the shares if the price is .05p leaving maybe .5 to 1bn shares for Cornhill.
If we increase the price to say 1p and decrease the number of shares to 1.5bn
then it might well leave 800m to 1bn shares for Cornhill but at a much higher
price.
This is just my own calculation but I can see around 2bn
shares being held by investors who are trying to force the short squeeze.
Brokers need 1.3bn shares to settle these trades already made. Flippers and
shorters who have found themselves in a naked position need a further 1.5bn
shares as a minimum. Given all of this, current holders of stock, and those
that take part in an open offer will find their shares very much in demand when
the trading resumes.
What price they get on the open market, will depend on how
quickly brokers and shorters want to settle accounts and what the current
holders decide to sell out at. I am pretty sure it’s far higher than the
current price though.
For these reasons I am very happy with how things currently
stand.
Ignore a lot of the uncertainty around the share, BMD and
Chris might make an offer, BMD is certainly very good at pumping stocks
up(although I am not really interested in being in that kind of stock).
Something might or should happen to Cornhill.
An EGM might or might not be called to vote out the current
BOD.
But as an investor all we really care about is the bottom
line and for me that’s looking healthy when it moves out of suspension. I am
genuinely happy, not worried.
Well thought out, we will see how this plays out, speculative punt in at 0.3 so yes need a positive result.
ReplyDeletegreat logic, but with the open offer there is nothing stopping them from issuing 2,8BN, 3.7BN or 9BN shares. its all confetti to the BOD and ontop of that they can pay Cornhill for the cost of the Open Offer in... you guessed it! SHARES! Maybe 2.7BN at 0.005p to CH and 2.7BN at 0.005p to Shareholders? BOD are playing dirty, and untill they're out there is no security for SH nor is there any shortsqueeze likely. Holding 1.3M "settled" but after push comes to shove; unsettled. GL.
ReplyDeleteIts always possible, but highly unliekly imho with the LSE and FCA looking at the situation in fine detail. I spent a couple of years working with Banking compliance with the BofE and its very much a hands off, quiet word solution with the retail customers never learning what changed and why.
DeleteIf they paid Cornhill that much in shares, it would certainly be legally challenged as inappropriate.
At the moment the BOD are not actually playing that dirty. They wanted to raise money and did it too cheaply with lots of cheap shares from themselves, but this is something most BODs do. I have no doubt that they have Rasputin type Cornhill figures in the background saying they have to do this and that.
However the very last thing the LSE/FCA will want now is for Cornhill to be seen as benefiting from this mess. I wouldn't be surprised if "unofficially Cornhill have been told they can't underwrite the offer", hence the delay announcing it.....