Capitalrising and the control question.@Aaronohfirstan answer to...

Capitalrising and the control question.

@Aaronoh

firstan answer to your question concerning GA 0,02$ options.

Frommy calculation, at all final selling price , GA lose money with the bonus cashsolution … but only before tax !

If we include taxes, he clearly wins with the cash bonussolution.

GA0,02$ options where Non Statutory or Non Qualified stock options (they weregranted to GA at the IPO, not as part of the employee shares purchase plan).The US capital gain tax will apply 2 times in case of Non statutoryoptions.

SoGA shares would have been taxed a first time when he would exercise his 0,02 $options (even if he didn’t sold the new shares, he would be taxed on thedifference between the exercise price and the curent market price at timeof excercising these options), and a second time wen he would have sold his shares in a takeover bid.

Thoseoptions were granted to GA at the time of the IPO. I suppose the situation wasdifferent then (GA could have still been a belgian taxe resident at thistime).That, or those options ware part of a control scheme they had at thebeginning.

Link :https://www.investopedia.com/articles/active-trading/061615/how-stock-options-are-taxed-reported.asp



@ PsyaNite
@ numantu

For what I understand of the capital rising rules :

- 4DS was allowed - under rule 7.1 to do a share placement to rise up to 25%, instead of 15% following a spacial waiver granted by the ASX to small caps that would be short of cash due to the pandemic.
https://www.asx.com.au/documents/asx-compliance/final-asx-class-waiver-temporary-extra-placement-capacity-09-07-20.pdf

- But they did not use this extra placement capacity. They placed 100 millions shares for a price of 0,045.
100 millions represent 8,78% of fully paid shares at the beginning of the year (1 139 044 555) , not 25%.
For what I see, they only used special waivers to make a back to back trading halt (4 working days instead of two), and probably to use rule 7.1 instead of 7.1A.

- Under the specials waivers, if they made a placement, they had to follow with a SPP. That is what they did. And they rised 3 millions $ more. but a SPP does'nt come under listing rule 7.1. So it has not to be counted in the 15% (or 25%) rising capacity.
https://www.asx.com.au/documents/rules/Chapter07.pdf

- In my opinion, they did took morethan they needed, but they did not dilute as much as they could have.

- Regarding the 15% (7.1) + 10%( 7.1A) placement facilities they are asking for at the AGM.
I think it is a resolution that appear at every AGM. I dont think they will need the money, but one must be careful. Beside, if another company buy 4DS, they must find everything in order, and the usual placement capacity already voted for.

So I'm not woried by the renewal of this 25% placement capacity, even if the resolution explanations are not redacted in the same way in AGM resolutions 1919 and 2020. And I still have some questions as to why they used 7.1 instead of 7.1A as they where under 10% anyway.


- The question remain as to why theyhad to rise so much money.

In my opinion, everything is not completly planned. They are cautious and they take avery opportunity to gain some leeway. Thats probably why they took as much money they could without diluting too much.

But they do have a plan because otherwise, this has no sens.
They cant go on with no effective control on the company. Specialy if they are approaching the end game.

I think the last CR is linked to their plan to reach control of the company.

What could have been their initial plan ?

In my opinion, they have pre-acceptance agreements in place and they have a White Knight.


Pre-acceptance agreements

- the board is controling 126 millions shares (diluted) or 8,98% of the votes.

- There are 40 millions of employees options (not in the board) those options will vest by anticipation on decision of the board.
We can assume that those employees will vote with the board because the board can refuse that their options vest by anticipation and the board can also refuse to give them access to the cash bonus pool of wich 40% are still not attributed.
So the board must be controlling 166 millions shares or 11,84%

- They need to control 184 millions more shares (13,16%) to reach the 25%+1 threshold that will allow them to block any special resolution (the selling of the patents, for exemple) and to deprive a bidder of effective control of 4DS if the price offered is to low.

- But they can't come out of the wood with a 25% controlling stake. ASIC will not permit it. it should be less than 20%.

- "Asic will take issue withpre-acceptance agreements if a bidder has obtained acceptance of shareholder(s)« ..whose shareholding, when agregated with the bidder’s, exceed 20% ». By Guy Alexander – « ASIC continuesclamp down on shareholder intention statements »

https://www.allens.com.au/insights-news/insights/2019/04/asic-continues-clamp-down-on-shareholder-intention/

(see cases studies atthe end of the post)

So what they can do is this :
1 - To have a pre-acceptance agreement to reach 19,19% (when added with whatthey already hold).
Thats about 94,5 millions shares, or 6,74% of all shares (diluted) ->a little less than the last placement
2 - They can ask a friend (The White Knight) to buy the 90 millions sharesthat would allow them to reach the 25% threshold -> Thats a little lessthant the number of shares that was bought on market in one single day, onseptember 9 2020... with no news.

Of course this still could not appear as an association of shareholders as itwould cross the 20% threshold that would force this association (board+employees+friend) to declare a takeover on their own right.

But the board could come up with it's 19,9% and and tell a potentiel bidderthat a certain friend (Mr White Knight) would vote for them and let them reach 25%that would forbide anybody else to reach complete control of the company.

In fact the real minimum controlling block is 19,9%.
Once a shareholder, or a groupe of shareholders, or a company, reach thislevel, everybody knows that they will go to 25% if necessary.
Reach 19,9% and you become a threat, and you can start to bargain.

So what I think is that the board as an arrangement in place to reach at least19,9% , and they have an arrangement with a potential white knight to securetheir position.
One must have in mind that the board is not a voting entity. Board members arethe ones who vote. And they can disagree on wich company is the right bidderfor 4DS.
There could be betrayals.
Thats why you need a big shareholder at 8%, (or better, two at 4%) thatwould agree to secure everything but who will not want to takeover the company.

The 6 millions dollars they have could help reaching this situation.
This money could act like a kind of "financial carrying", helping afriendly large shareholder to withold his decision regarding a bid offer.


What a potential bidder will do ?

A potential bidder will do exactly the same.

- He will secure 19,9% with Pre-acceptance agreements
- He will have another shareholder ready to put the missing 6% to reach 25%. This friendly shareholder will be decided by an increase in the first offer price.
This would be precisely choregraphed as to please the Takeover Panel and ASIC people.

From that 25% position, the bidder will easily become the only possible bidder and ther would be no other, offer eccept if the board is backing another bidder.

Remember, since you only have to report arrangements you made 4 months before declaring a takeover, some arrangemets will never be known.

There could up to four 19,9% blocks of shares already under pre-acceptance agreements to the benefit of different bidders, today.
And you will never hear of them.


This is only an effort to decypher the control situation.
I might be wrong and this is not afinancial advice.




Here are some exemples of takeovers that illustrate those pre acceptance arrangements .
I found them in ALLEN's Guy Alexander article dated april 2019.

https://www.allens.com.au/insights-news/insights/2019/04/asic-continues-clamp-down-on-shareholder-intention/

TawanaResources scheme of arrangement

In this transaction, shareholders holding, in aggregate, 39.5 per cent of the target shares had made statements confirming their intention to vote in favour of the scheme in the absence of a superior proposal. Prior to the first court hearing, ASIC reserved its position as to whether those arrangements had given the bidder a relevant interest in more than 20 per cent of the target, in breach of the Act. ASIC also required the target to 'tag' the votes of those shareholders who had given the statements. That way, ASIC could appear at the second court hearing to object to the scheme if those votes ultimately proved determinative of the scheme's approval.

ASIC's approach in Tawana Resources was similar to its approach in the UnityMining scheme in 2016 (where the shareholder intention statements were, in fact, given to the bidder through the target after the bidder had indicated it would increase the scheme consideration if the major shareholder made a 'truth in takeovers' statement). Although the court in Unity Mining and Tawana Resources found the shareholders who made the statements did not constitute a separate class for the purpose of voting on the schemes as a result of their statements, it remains to be seen what a court would do if, in the future, there was a challenge to the fairness of a scheme that would not have been approved by the requisite majority without the votes in favour of those 'tagged' shares.

OzMinerals' takeover bid for Avanco Resources

Oz Minerals' announcement of its offer included a statement that it had entered into a pre-bid acceptance deed with Appian in respect of 18.45 per cent of the target shares, and that funds and accounts managed by Blackrock (which owned 11.6 per cent of the shares), intended to accept the bid for all of their shares in the absence of a superior offer, and subject to the satisfaction of the bid conditions.

A few days later, Oz Minerals further announced ASIC had asked it to clarify Blackrock's statement of intention, that Blackrock was not bound by its intention statement, and that Blackrock reserved the right to deal with its Avanco shares in its absolute discretion.

Billabongscheme of arrangement

Billabong's announcement of the scheme noted the bidder, Boardriders, had an existing 19.3 per cent relevant interest, and that Centerbridge, another 19.3 per cent shareholder, intended to vote in favour of the scheme in the absence of a superior proposal.

In that matter, ASIC sought details of any discussions between Oaktree and Centerbridge which may have caused Centerbridge to agree to that shareholder intention statement. Here, there was no such relevant agreement, arrangement or understanding because Boardriders had not sought the statement from Centerbridge. Rather, the target board had wanted the assurance Centerbridge would support the scheme, given Centerbridge's support was vital to the transaction proceeding.

InvestaOffice Fund scheme of arrangement

In the IOF transaction, Blackstone sent the target a letter which was released to the ASX, stating it was prepared to increase the consideration under its scheme to acquire IOF if the 19.95 per cent shareholder, ICPF, issued a public statement within two days stating it intended to vote in favour of the Blackstone scheme in the absence of a superior proposal. ICPF then issued a public statement in those terms, and Blackstone increased the scheme consideration.

Again, ASIC sought details of any discussions between Blackstone and ICPF which might point to an agreement, arrangement or understanding to make the public statement. Here, Blackstone argued there was no such arrangement – it had simply stated publicly it was prepared to increase the consideration on condition that ICPF make the public statement, and then ICPF had satisfied that condition. Despite this, ASIC maintained Blackstone had acquired a relevant interest, and required that a substantial holder notice be filed.

NOT A FINANCIAL ADVICE