2M shares roughly equivalent to 10,000 ADS (American Depositary Shares). The individual is the ADS and the total ADS issued are known as ADR (American Depositary Receipt).
Why start with that? Because that is what the DynEvolve transaction involves. IMO I think it would be likely that SSN will delist from the ASX and most of the new capital is sourced from the USA - just my view on what has previously happened with other stocks.
SSN trades on the OTCQB - "Venture Market" (probably should be named Adventure) - which has pretty loose listing rules only requiring current reporting, annual verification and certification, meet a $0.01 bid test and not be in bankruptcy. Implicit here is since Private Equity is in the business of making money for themselves (not others ... there is no agency here to existing shareholders) is the need for liquidity - so with all the shares being issued the consolidation being referred to may happen (it did for my others but that was to keep them listed on main exchanges which have a minimum price of $1). Given SSNYY trades around US$0.25 (and that's equivalent to 200 ASX listed shares) a simple 1 for 10 raises the US$ price to $2.50 and it becomes equivalent to 2,000 ASX listed shares.
What you do is dependent on your level of risk and whether you can accept the loss (either now or a possible 100% loss). If the intent is to delist from ASX it will be "more difficult" to sell on the US exchange.
For round number sake approx 16.45M ADS available (3.29B ASX shares)
Current Trades at (US$) of $0.25
Current Market Cap then approx US$4.1M (note the difference in MC on the different exchanges)
Initial DynEvolve transaction was US$1M in equity for 800,000,000 ASX shares or 4,000,000 ADS.
That will bring the share count to 20.45M
First thing to notice is that current share price of $0.25 happens to be equal to the price paid by DynEvolve for their shares.
Second thing is if all shares priced that way then $0.25 x 20.45M = $5.1M Market Cap. Taking current exchange rate into account US$5.1M = AUD$6.5 which divided by now 4B ASX shares = AUD$0.001625 so it other words still valued between 1/10th and 2/10th of 1 cent.
That's just looking at the equity of the company. The value in the company at present is NOT owned by shareholders but by the company's creditor (i.e. MOB). Equity has what is known as a residual claim. Those here who are in finance know the meaning - shareholder's claim on profit and assets of a company COME AFTER all obligations have been paid. This is the problem. Assuming that the carrying value on Foreman Butte is correct (is may be low or it may be high) on balance sheet, "shareholder equity" was about $1M. Add in the $1M tipped in by DynEvolve and its $2M (so market values SSN equity at 2.5 times its book value). Also means SSN has $12 of bank debt for every $1 of Shareholder equity ... that is unsustainable leverage.
Simply put ... nothing (good) is likely to happen until it becomes known what the strategy is for dealing with the bank debt. Just remember though, as a shareholder you are at the back of the queue. Whether you get to eat at the table is up to DynEvolve (IMO) and/or other parties to the debt restructuring.
SSN Price at posting:
0.2¢ Sentiment: None Disclosure: Held
