All good - and yes they could have done a better job in communicating all of this. In general, I wonder if many people actually got so confused by the convoluted nature of the offers and what was involved that they put it all in the "too hard basket" and didn't subscribe for anything under the partnership offer and then they will be come further confused when the bonus options are issued to them and wonder why this has happened when they did nothing at all and wonder if either a mistake has been made, or money has been taken from them without their knowledge or some other reasons.
It will be interesting to see how MGF and the options trade. MGF (the closed class units) currently trade at a 4.84% discount to NAV and MGOC (the open class units) trade at a 0.83% discount to NAV. This disparity in discounts to NAV has existed for some time. I don't really understand the logic behind why this would be the case, but it is. I understand that part of the strategy from Magellan in these two issues (as well as raising funds) was to try to create an environment where that NAV discount gap was closed a bit and started to equalise between the closed units and open units.
Remember that the exercise price of the options is a 7.5% discount to NAV and not price. Currently the NAV for MGF is $1.7234 and the price is $1.64. If we were able to exercise the options today what this would mean, in theory anyway, is that we could buy new units in MGF for $1.5941 (NAV $1.7234 less 7.5%) which is only a 2.798% discount to price.
The value of the option? Yes, this will be interesting and worth watching. If the example above is used then the theoretical "value" of an option is only about $0.05 ($1.64 - $1.5941). Why would you pay 5c for an option that, when all said and done, adds no benefit to price outcome when you exercise it? Well, if that price to NAV gap starts to improve and reduce then the value of the option should theoretically increase (marginally).
If that NAV gap does start to shorten then the option price could go up. As an example, if the NAV gap on MGF shortens to 1% (which is closer to the 0.83% NAV gap of the MGOC open class units) then the theoretical MGF price today would be $1.7062 which would value the option at $0.1121 (exercise price $1.5941 less theoretical market price $1.7062) which is a 124.2% increase in price ($0.05 value before vs $0.1121 value now), which is a large % increase but really small $$'s. I'm not sure I'd be going into the market to buy up big on the options in the hope of a shortening of the NAV gap in the medium term as a way of making big $$'s.
MFG Price at posting:
$43.44 Sentiment: Hold Disclosure: Held
(20min delay)