Hi to all the OGXer’s out there. I haven’t posted on the OGX threads for a while but have been watching the OGX chart daily to see if a bottom for the SP has been set up. The purpose of this post isn’t to discuss the current state of the chart but to try and add some value re the possible impact the new convertible notes might have on the OGX SP. But I have added the chart stuff to the end of this post if anyone is interested.
The OGX capital structure and its implications re an investment in OGX has always confused me a bit. The recent announcement re the CNs just added to the confusion. So I thought I’d have a look at this HC OGX thread and see if some of the FA posts could help to explain some of my confusion away. Well anyone reading this thread already knows the answer to that – not likely! So I did some of my own FA research and discovered a few things that should be of interest to OGX LTHs and potential Investors.
So my first question was to what extent these CNs could serve to dilute OGX’s SP. Well, based on some very rough calcs I came to the conclusion that all things remaining equal we could expect an SP drop due to dilution of between 4.5% for a tranche A only issue to about 18% for the full tranche A, B, C, and D issue. I haven’t added any of the calcs here as it would appear that no one would be interested.
My second question related to exactly what CN’s were and how they are used, and what was the background and intent of this new investor Magna. I can remember back a fair while ago in my post-grad studies in Finance learning about capital structures and convertible notes etc. My impression back then was that CNs were pretty benign in nature. But it would appear that my initial impression may have been somewhat naïve. My impression has changed somewhat after reading the following interesting Bloomberg article from 2015 on the Magna Founder, Josh Sason. Mr Ari Morris, who is quoted in the OGX Convertible Notes announcement, was a salesman for Magna at the time and gets a mention in the article as well. A link to the Bloomberg article is provided below.
I consider the Bloomberg article compulsory reading for all OGX LTHs. It probably should be included in the syllabus of all University MBA program Finance subjects as well. I don’t know whether Magna’s business model has changed at all since 2015, but the people in the Management Team are the same. Anyway, I suggest the reader should read the article and come to their own conclusion.
Well, now back to the real world of the OGX share price action as shown on the chart. My basic daily Trend-Momentum-Cycle chart is shown below.
My comments on the chart are:
- The SP is still in a strong down trend and at the bottom of a descending channel pattern that commenced back in April 2018.
- Today the SP hit the bottom of the previously identified support zone set by the Ultra-High Volume Anchor Zone back in December 2017 – the “Back to Basics” breakout candle. The Anchor Zone Close was 4c. I would be looking for this level to provide strong support going forward.
- Long term momentum has been and currently is still turning up.
- On a short term positive note today’s price action has formed a “spinning top candle” pattern. This is a bullish sign when it appears at a support level.
- From a longer term perspective the SP has to do a lot of work before it can move back into the up trend that we are all hoping for.
Well there you go, short term strong support at the 4c level. Hope it holds and I hope the new Investor “Magna” does in fact turn out to be a genuine Investor. Something to keep an eye on I think.
Good luck everyone – Wilf.
OGX Price at posting:
4.3¢ Sentiment: None Disclosure: Not Held
