Quantitative analysis

OK.. here are a few important sums that might help fellow posters to focus on making decisions. It certainly helped me!!

I note the AVB buyer share price is 15.5c today.

So there is an obvious decision... do I take the 15.5c for example and head for the hills, or do I sit.??

The offer is, per AVB share, 8.5c cash and a number of OZL shares to the equivalent value of an additional 8.5c, based on a (then) market price of $9.45 for OZL. That gives total valuable consideration of 17c... per AVB share.

So the spotlight falls heavily on the OZL share price... and especially where it is on the future settlement day.

The question really is : what does the OZL share price have to fall to make it equialent to the 15.5c cash available to me by selling on market.

OK .... if $9.45 represents 8.5c
then what OZL share price represents 7.0c ?

(8.5c cash + 7c value in OZL shares = 15.5c)

Answer : 7.0/8.5 x 9.45 = $7.78

So in English, if I sold at 15.5c now, it would be the equivalent in money terms of "accepting the offer and getting my 8.5c cash and however many OZL shares I am entitled to, and finding that on the day they have a current market price of $7.78."

Clearly then... If the shares are better than $7.78 on settlement day you are ahead of the game by accepting the kind offer.

If the shares have fallen in a hole, temporary or not, and are less than $7.78 you would have been better off to have grabbed the 15.5c cash on-market and run.

That is the pure quantitative analysis.

It takes no account of tax, brokerage, possible offer withdrawal, the world coming to an end (in which case it would not matter anyway), possible higher offer... and the vagaries of emotions.

The OZL shares are at say $9.00 now. They would need to fall to $7.78 on settlement day, or a drop of about $1.20 to make the on-market sale at 15.5c a better number-deal.

AVB were very precise when they said that it was not 17.0c but a 16.8c offer .. due obviously to a slight fall in OZL share price since the offer was made.

For our friend who was sitting on a 15,000,000 buy at 15.5c, should he get his order filled and the market in OZL remains at $9.45 or par.. he makes
1.5 c (17.0 - 15.5) x 15,000,000 or $225,000 profit. for about 6 weeks "work".
which makes me disinclined to sell to him and his mates at 15.5c, even out of jealously if not logic.

That is pure numbers....

On market 15.5c now represents a no-risk play.

Sure you may get a bit less than you might, but worrying about offer withdrawal, copper price falling, and all the
other worries associated with having a mining stock under takeover for a short period... are gone. The difference represents a bought insurance policy. (our buyer friend is the insurance company who effectively takes that risk for us) For slightly less gain, I am assured of no sleepless nights... for a few weeks anyway.

Set aside all those emotive and what-if factors.... out the window... forget them.

What are the chances of a big fall in OZL to (significantly) less than $7.78 on settlement day??
And if it did fall, would I be prepared to wait a bit for it to rise to over that $7.78? How much faith do I have in OZL who will be part AVB and Tony and the Gang anyway?

I make no recommendation... out of principle. It is numbers here, not speculating on external factors.

But it may help others in making a decision.. or avoiding a hasty one.

Cheers, PP