re: ceo dumps (not all that it seems)
Hi Inquisitive,
2 observations: 1) CEO sells some of his holding on Wednesday, post results, but before the shares hit 30c; and 2) Marketmad subscribers sell on Friday, as the shares fall back to 30c (and lower).
Tonight, they are @27.5c.
Clearly, some have been watching UEC, but if MarketMad thought that the share price could treble to 50c, or more, then why did they sell out @30c?
And, if the CEO has an inkling of what the future may hold (either in terms of higher revenue, increased EBITDA, or in a premium laden takeover bid), then why sell out some of his holding (and perhaps most of his currently vested /tradable shares) for ~28c?
In the know? Or, don't know? Hard to say, but any takeover price has to be predicated on the basis of: 1) asset value (ie: MC below asset replacement cost, etc); or 2) profitability (and some multiple thereof).
@27.5c, UEC is at or near asset replacement value, and up to 30% above net tangible assets. It is also on a 10x EBITDA multiple to EV.
Traders may not care too much for these points, but M&A specialists do, as do financiers, predator Boards, and corporate raiders. Unless a bid can be earnings accretive, or superior break-up value can be demonstrated (ie: sum of the parts greater than the whole), it will be difficult for many to factor in a pricing premium for control, particularly in the mid 20 range, or above.
The question, then is, if a bid is forthcoming, then at what price will that bid be?
The coming weeks should demonstrate this, but with McGrath now a seller, the question is whether there is any bid out there at all. And, if there is, will it be of the order of a premium for control, or a discount for acquisition?
To date, my line of reasoning has favoured a 15 -20% premium for control, with pricing set in the 18c+ range (ie: 18+15-20%). @27.5c, however, I would have to argue that a pricing premium has been fully factored in and that any likely bid price will be back in the low 20s (at best).
The exception to this, however, is if any prospective bidder has been acquiring on-market whilst building up a stake. If so, then such a bidder will be obliged to offer its on-market price, or better, in order to bid for UEC.
Until recently, that would have meant that a bidder could have acquired on-market to 15-18c, and then offer a 15 -20% premium to this for control, with minimal risk. Any further buying, however, since early July would have jeopardised this approach (ie: locking in a higher bid base due to the 4-months rule - highest on-market purchase price paid by the bidder in the preceding 4 months) necessitating either a change in approach, or withdrawal from accumulating.
So, where does this leave us?
ALN is on record as a likely seller.
ALN's appetite for an exit price is motivated by 2 things: 1) repayment of the loan facility; and 2) a reasonable share price (ie: sustainable in the low 20s).
Any prospective bidder, therefore, would need to get ALN on-side in order to progress with a bid for UEC. Alternatively, it would need to build a corner stake (blocking, strategic, etc).
So, if the CEO was a seller last week, and refused to comment on media speculation concerning prospecive corporate action, I would have to conclude either: 1) the CEO is not being kept across any such corporate activity (not likely); 2) the CEO is aware of corporate activity, but at a prospective lower price than what he has sold his shares for (again, not likely); 3) the CEO /Board has conducted a strategic review of UEC's relative worth /value, and the results of that review have returned a much lower prospective acquisition price range (likely); or 4) there are currently no prospective bidders out there, or bidders willing to offer the type of pricing that UEC (but not necessarily ALN) is seeking (quite likely).
In the coming days, therefore, the share price is likely to continue falling and could settle back towards the 18-20c range fairly quickly (all fibs, aside which, I believe may point to a 22c retracement).
