The deal is rather complex as it involves numerous milestones and stock consolidations on a 2 for 1 basis. The company currently has 161,264,438 shares listed. These will be consolidated on a 2 for 1 basis and need to be added to the shares issued for the consideration of the acquisition and the capital raising. This gives an indicative total of 494,783,183 shares post successful reverse merger ignoring milestones and options.
The options can be ignored as the strike price is well above any current market price. The deal involves an earn out agreement for the company to make revenue of $5 million during FY16. The company currently has revenues of $282,350. The complexity of this deal means it is difficult to value whether this earn out provision is generous as the number of shares is significant and the business model is based on a low-margin approach. Currently, the firm has gross profit margins of 27.29%. Assuming these margins can be maintained this will see the company with gross profit of $1.36 million. It is difficult for the Pyne Leisure portfolio to value whether this specific provision is in the outstanding Ardent Resources Ltd shareholders best interests
Regardless, the balance sheet of the company is strong with a post merger equity value of approximately $8.2 million with $5.4 million in cash. Due to the added complexity of the share registry consolidation this means the current share price should be doubled to reflect the dilutive effect of the deal on current holders. Hence, the indicative market capitalisation is approximately $22.8 million at a share price of $0.023 [calculated using $0.023 * 2 * 494,783,183 shares].
BREAK
Change the values as appropriate.
Either:
(a) Wait for the capital raising to get cheaper shares; OR
(b) Buy now for more expensive shares but without the risk of oversubscribed capital raising.
