LYC (ASX) Ann: Partial Conversion of Convertible Bonds and Appendix 3B

Originally posted by ContraryJ ↑

Well this did surprise me quite a bit why would anybody do bound conversion before warrants.
They I started looking at numbers and it is very clear. Both recent Transactions have been Fortress and they are holding not selling WARRANTS.

Lets look at fortress.
They owned 25 M of 225M bounds. Or 11 %
Next there were 18,211,504 of the 3.8 C warrants exercised 18,211,204/ 174,365, 466 = 11%
With those there was 36,434,801 5 C warrants exercised / 348,843,837 total = 10.5% not exact but close.
Now there are US $25 Million bounds converted which is exactly what was reported for fortress holdings and for the record 25M/225M = 11%

So maybe I am crazy, Some certainly thought so, it looks to me like the last two transaction July 24 and August 2 were all Fortress. Looking how price has risen I do not think they are selling any Warrants. The two transaction before these were clearly others buying and selling. If I am correct Fortress now has 388M shares which would put them well above 5% if both fortress funds are considered one which is what AUS always said. (I disagreed strongly) I think shares will be split between funds in which case “FCCD Limited” will have 6.3% of total Lynas shares and “FCCO DAC” will only have 3% so only FCCD Limited will have to report 5 % ownership in 30 days. Of course if funds then distribute share to the fund holders then no one will report.

Some thought I was wrong when I pointed out the 18,211,204 3.8C warrants matched Fortress share exactly. We now have 3 transactions all of which are within Fortressed % ownership within ½%

If you are going to say this is wrong what other reason would anybody have to convert bounds while still holding Warrants at lower price? Converting does not take any new money which warrants do but it does mean a loss of interest on converted amount. SO my position is fortress first did all there warrants on July 24 then all there bounds today. They are not selling Warrants which is very good for all of us small holders. There is good reason to sell stock from conversion first and this is bad news.

Warrants long term gain clock starts day exercised you need to wait a year for long term gain. In US bound conversion is considered a nontaxable event (called a "non taxable exchange"). So the day they are converted the stock is already long term gain, the purchase date of stock is the date the bound was purchased. No advantage to buy and hold. The only thing I can think they are going to do is sell some bound stock right away to raise cash at long term tax rates. Hold warrants for year and then sell those as long term holdings. remember these are high net worth individuals if they are in US 35% or less tax bracket then long term rate is 15%. If in 39% tax bracket then 20%. Managing time for long term gain is very important to these people.

This is getting very interesting, I am having fun.

I have held convertible bounds and enjoyed tax advantages of taking stock. I have never seen bound terms rewritten like Lynas has done. It is possible the purchase date will be when terms were adjusted. If so then purchase date will be this coming November. I doubt this but do not know. If it was true why purchase now?

Expand

They do not hold over 5% because as has been plainly pointed out they are selling first then converting.

Ps: by the way how do you think my call of net debt being under $200m US within 12 months going?
I think your suggestion was in the ballpark half that reduction by 2020 if I'm not mistaken

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Last $7.02		Change 0.000(0.00%)		Mkt cap ! $6.561B

Open	High	Low	Value	Volume
$6.92	$7.09	$6.86	$26.51M	3.784M

Ann: Partial Conversion of Convertible Bonds and Appendix 3B, page-37

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