"The $8 Million Subordinate Loan from ZETA is valued at 16c option."This is a half-baked misrepresentation that suggests a lack of understanding of how the loan and oppies relate to each other. Think of the oppies as a separate element to the (now fully repaid) emergency $8m loan to Zeta. Think of them as a sweetener to Zeta for coming to the table to provide the subordinated lending to PAN in its hour of need. Also, Zeta couldn't back out of that deal, even if it wanted to - not that it would. The right to the oppies also came at a no additional cost to Zeta (i.e. nil premium paid).
Punters should be aware, however, that there are circumstances in which the oppies will not issue. Read the Explanatory Memorandum associated with the EGM Notice (pp.11-13). Shareholders must vote on approving (ratifying) the sale of the HRN shares (Resolution 1) and also the granting of the oppies (Res 2 and Res 3, depending on whether Res 1 is passed, or not).
Here's a quick summary of possible outcomes:
- If the HRN share sale is ratified (i.e. Res 1 passes) and Res 2 passes, then 28.5m 16c oppies get issued to Zeta. (Btw, since PAN has now fully repaid the debt, Zeta would simply pay the $3.4m in cash for the approved HRN shares (i.e. no offsetting required now.))
- If the HRN share sale is ratified (i.e. Res 1 passes) and Res 2 fails, then a $456,328m make-whole cash payment is due to Zeta (because the loan was fully repaid before 30/06/20). In this instance no oppies will issue to Zeta.
- If the HRN share sale is not ratified (i.e. Res 1 fails) and Res 3 passes, then 50m 16c oppies get issued to Zeta.
- If the HRN share sale is not ratified (i.e. Res 1 fails) and Res 3 also fails, then a $800,000 make-whole cash payment is due to Zeta (because the loan was fully repaid before 30/06/20). In this instance no oppies will issue to Zeta.
If Zeta ends up being issued oppies it will
only be worth their while exercising them
if/when the PAN SP exceeds 16c. Only then will PAN receive the value of the oppies exercised (i.e. $4.6m or $8m, respectively) in return for the issuance of more shares to Zeta at the expense of further dilution to existing holders. Yes, at 16c PAN will have an MC of $328m, but it needs to get there first. Suggesting that Zeta will automatically exercise at that price when they receive any oppies is inaccurate. It doesn't work like that. That said, agreed that restarting and attaining decent operating metrics will help in that regard.
Agreed that it's puzzling why Zeta completely abstained from the RI, but that's separate from the issue discussed, above.
