Ann: Trading Halt-LYC.AX, page-14

Senaris, that is so obviously wrong.... Debt of roughly 290m AUD will vanish and be replaced by equity. Total company value (=assets-debt) needs to go up at least in the same proportion. Purely mathematically, it will be around 8cts after the conversion. However, there are some other factors to consider here, some of which are positive and some of which are negative long-term:
(1) Lynas for the first time will have a substantial anchor investor and additionally that hedge fund is US based. Hence, a side-effect might be an increase of selling opportunities for the US market and reduction of strategic reservations to Lynas from a US political angle. The fact that it has an anchor investor owning more than 45% will reduce volatility of the SP as MtK will want the SP to go up moderately over time;
(2) The fact that MtKellett pays 10cts means that the shares are worth 10cts for now since this is an arm's length price. Since they have gained more insight into the company's future than any of the small investors, this is what the company is worth (with an upside potential from their perspective because otherwise they wouldn't do the deal). I think that when the market resumes trading provided that the deal is closed as rumoured, SP will be around that level of 10cts;
(3) The recent SP decrease from 6.5 to 5.3cts might have been staged by MtK to prepare the current bid. Otherwise, it would not look as attractive to current SH. I assume that if the SP were currently at 7cts, approval at the AGM would be difficult;
(4) MtK is a hedge fund. What their mid- to long-term objectives of this move are, one can only speculate. My guess is that they have planned this for some time only waiting for some pressure on RE prices which deteriorate the CF development from the additional capacity. That implies that the next QR will not be pretty. However, since they are a hedge-fund, they might not hold these shares forever but once RE prices are really recovering and pressure from CF is reduced (which to some extent is already achieved by taking out a major chunk of financing outflows), they can sell at 15 or 20cts and have still realised a nice ROI on what otherwise would have looked like a bad investment to their investors. Their current 2.75% interest is certainly not making their shareholders happy at that risk level;
(5) For current SH, this should be a good deal since AL wouldn't have done it unless she were of the opinion that the next 2 quarters might still be difficult because of sustained RE price pressure from the Chinese producers/China domestic demand. Dilution is obviously not good for current SH as it substantially reduces any long-term upside potential but as said above there are many positives which come out of such a deal;
(6) The deal hasn't been closed as otherwise the TH would not be necessary to last until Thursday. JARE might have some issues with a US based investor since this might impact their position to secure an exclusive Japan RE resource.