Well firstly, looking at the presentation, it looks like subscriptions have, to this point, held up extremely well - under the circumstances. Clearly the pandemic has done serious damage to SKT, as it has done to sports generally. So obviously the business' intrinsic value has taken a hit from where it stood in January 2020. That said, prior to the announcement there were two key issues that were looming large, in my mind. Firstly, how will subscriptions hold up in the face of the sports disruption (a severe hit to advertising revenues, and to commercial subs, was never in question). The second issue, especially in the face of the uncertainty with respect to the hit to cash flows, was how would SKT fund its maturing bond obligation (March 2021).
As such, the recent update, together with the capital raise, essentially remove these two sources of uncertainty.
Additionally, the near-term forecasts, in terms of what they imply with respect to the impact of C19, imply a lesser hit to the intrinsic value of SKT than I had previously been guesstimating (this is my personal opinion, and I may have this wrong).
Finally, the recent update indicates that cash levels have increased strongly since Dec 2019. This speaks to the stickiness of the subscriptions discussed (I guess), but also to the fact that essentially with no new product on offer, SKT is running down its working capital as it leans on its suppliers, who have after all not delivered on their rights.
When I combine all of the above, it seems to me that the value of SKT (total value of enterprise, not per-share value), on completion of the CR, will have increased by substantially more than what what a pro-forma EV (enterprise value) calculation would indicate - versus where it stood prior to the update or the CR (in my mind).
But yes, dilution will be a problem for anyone not participating. That said, I think if one chooses to sell their existing holdings, then one will have released sufficient cash to cover about 40% of the cost of exercising one's rights.
SKT Price at posting:
18.5¢ Sentiment: Buy Disclosure: Held
(20min delay)