I've been doing some DD on SYA and PLL, and wrt ELV before jumping in.
The last respective CRs were completed as follows:
- $40M / 16.8c = 238,095,238 PLL shares, and
- $40M / 0.032 = 1,250,000,000 SYA shares.
- The CR SYA to PLL share ratio was 5.25 to 1.
At current share price of PLL 10.5c and SYA 0.016c, an investment of $24K can buy the following:
- $24,000 / 10.5c = 228,571 PLL shares, or
- $24,000 / 0.016c = 1,500,000 SYA shares.
- The current SYA to PLL share ratio is 6.56 to 1.
The latest merger update stated that the 150 to 1 consolidation will proceed.
So, post-consolidation, the status for a $24,000 investment becomes either:
- $24,000 / 10.5c = 228,571 PLL shares, or
- $24,000 / $2.40 = 10,000 SYA shares.
Moving forward to closing of the transaction, after the 3.5133 / 100 CDI adjustment: the post-closing status becomes either:
- $24,000 / (10.5c x 0.035133) = 228,571 x 0.035133 = 8,030 ELV shares, or
- $24,000 / $2.40 = 10,000 ELV shares.
- The ELV SYA to PLL share ratio will be 1.245 to 1.
From an arbitrage perspective, and benchmarking to the 3.5133 exchange ratio, there seems to be the following implications:
The CR SYA to PLL share ratio of 5.25 to 1.
At the time of the CR, the market rated a significant premium to PLL shares compared to SYA shares.
The current price SYA to PLL share ratio of 6.56 to 1.
At last Friday's closing share pricings, the market rated an even higher premium than at the time of CR to PLL shares compared to SYA shares.
The ELV SYA to PLL share ratio of 1.245 to 1.
Post-closing of the transaction, the forward-looking valuation premium for PLL shares is reduced greatly but the indication is that it is still at a premium for PLL shares compared to SYA shares. But this doesn't make sense because all ELV shares will be of the same value post-completion.
Overall implication:
There is either higher risks inherent in SYA shares that warranted the market's discount on SYA valuation, or there is significant arbitrage advantage in exchanging PLL shares for SYA shares before the transaction closes, or both.
My take is that (1) the longterm annual 113,000 tons SC6 offtake by PLL at $500-$900 per ton has been factored into the SYA discount by the market, and (2) the downstream processing advantages to PLL have also been factored into the PLL premium by the market.
Have I missed something(s) in the DD?
Note:
The 50/50 fully diluted equity sharing is unclear as to what it really means. Is it by SOI, or by Shareholders' Equity adjusted for the different net value per share in both companies. I have used AI to verify the latter's assumption by calculations, and the conclusion seems convincing.
Also, I assume it is the latter because the former will not get the go ahead from consultant financiers and independent analysts watching this merger unfold.
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