Ann: 2021 Half Year Results Presentation, page-8

"Why so cheap? @madamswer"

A few reasons, I think, the most significant one being the $350m of contingent liabilities in the form of legal claims being made against the company.

If even if some of those claim chickens come home to roost, well, it won't be pretty, and highly dilutive equity issuance will probably be required.

Also, like most companies making the transition from the private ownership to publicly-listed life, governance is somewhat wanting, methinks.


"Also they were meant to IPO with 84m shares right? And went with 52m?
e.g. buying back in $50m shares (32m - so like essentially 25%)? now mgt is buying more shares back."


The pre-IPO share count was 54.1m, as you can see from the Table below, and the plan was to raise $20m through the issue of 5.063m shares to new investors, taking the total number of shares to 55.8m:



As it happened, they didn't manage to raise the full $20m; only something like $14m - meaning that 3.45m shares were issued to new investors as part of the IPO, instead of the 5.06m that had been planned.
(That the take-up was so poor is a bit of a statement in itself.)


So, no; they weren't meant to list with 84m shares; that figure included the 30m shares owned by Stockdale (a PE entity), which were bought back in January well before the IPO.

From the prospectus:



Three things about the Stockdale buyback are worth noting:

1. Stockdale exited stage-left on less-than-good terms, is my understanding.

2. There is a $30m deferred consideration which will need to be paid in coming months (prior to 31 Dec 2021) to complete the buyback of Stockdale's shares.

3. Stockdale retain 25m "Upside Performance Rights" (UPRs), the value of which is dependent on the DRA share price. The formula for how many shares, N, that Stockdale will end up receiving via this UPR arrangement is:

N = [25m * (Share Price - $3.10)] / [Share Price]

So at the current price of $3.75, an additional [25 * (3.75 -3.10)] / 3.75] = 4.33m shares will be issued to Stockdale, so that's about 8% dilution.

And the higher the share price goes, the higher the value of the UPRs, the more shares Stockdale get and the greater the dilution is for DRA shareholders. (For example, if the DRA share price went to $5.00, 9.5m shares would be issued to Stockdale and the dilution would be 18%.)

Something of which to be aware when assessing DRA as an investment opportunity.


"why ipo anyway."

It's really little more than a compliance listing, so the reason for listing is to provide existing shareholders (effectively management and employees) the opportunity to liquidate their shareholdings.

The real question that warrants asking, I think, is why issue shares in an IPO and then undertake a buyback a mere two months later?

I suspect it's an example of the governance question to which I referred earlier in this post.

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