$ 37 million placement

This announcement is out of the blue. For long term holders of TLG, the story has read like the plot from a nordic noir series, with more twists and turns that make the head spin. This is just the most recent episode. So let us keep a level head and consider what has been announced.

Smedvig, TLG's largest shareholder is selling out. So is this a bad thing? It was announced after markets closed in Australia and should be concluded by tomorrow's opening. It might be considered as being in direct competition with the capital raising and the Share Purchase Plan (SPP), except that the capital raising to institutional investors was successfully concluded late last year and the shares issued. The SPP closed on Friday 15 January with results to be announced on Wednesday 20 January. So neither of these transactions are impacted, therefore TLG still has the funding for the Pilot Plant and will raise at least $ 10 million through the SPP for other activities. I say at least $ 10 million as the price at which TLG has been trading recently has been well in excess of $ 1.45 the SPP offer price, suggesting a significant oversubscription is most likely.

I note that the Smedvig sale is being handled by none other than Goldman Sachs, whilst the current capital raising and SPP were being handled by Morgan Stanley, both New York investment banking royalty. How is the sale being conducted? This is book building dutch action where each institution bids for a block of shares at a price of their choice no lower than $ 1.45, rising in increments as announced to the market. Naturally a sale of this magnitude would depress the market if it was dribbled out over a period of time, but for institutions to acquire a significant stake or to increase their stake might require a premium, hence the auction. This means the new floor for TLG is at least $ 1.45 and most likely higher when the outcome of the placement is announced tomorrow. The way this works is that to guarantee full allocation each institution has to bid as high as possible.

I was always a little surprised that Smedvig never participated in any institutional capital raising over the last few years, not even exercising the long dated options it was granted when it became a shareholder, which would have given it a dominant holding. This suggest they have never been conviction investors, but rather early supportive players.

I continue to hold.

This is merely my opinion on the most recent events and does not represent a recommendation of any kind, so please do your own research.