Ann: TFS Share Purchase Plan Closes Heavily Oversubscribed-TFC.AX, page-4

I have been trying to understand why there is the selling pressure.

It is not short sellers because the proportion of capital shorted is trending lower as per http://www.shortman.com.au/stock?q=tfc.

I established the thread “what are the negatives”. A couple of posters expressed concern at TFC’s cash flow and cash profits. I do not share those concerns as per my response to the threads.

It is possible the sellers could be the vendors to the Viroxis and Santalis transaction. The base payment of $US23.4m comprised of $US20.9m of TFC’s scrip. See page 4 of ASX announcement of 18 June 2015. Significant part copied here:

“In relation to the fixed minimum purchase price, a total of 15.3 million shares is expected to be issued within the following time-frames and be subject to the following lock up periods:
 Stock issued in July 2015 and subject to no lock up period: 3.5 million
 Stock issued in July 2015 and subject to lock up period of between 6 and 30 months: 9.1 million
 Stock issued between September 2015 and July 2016 and subject to no lock up period: 2.7 million”

Interestingly, the first and last tranche – a total of 3.5 + 2.7 million shares - have no escrow period. I expect TFC would have preferred to issue these shares with a significant escrow period. So maybe the vendors insisted no escrow period because they wanted to convert the shares to cash.

This could explain the selling pressure when the prospects for TFC are so positive.

[I am expecting the auditor to require TFC to increase the price used to value its trees from the current $US2,800 per kg equivalent to closer to the market price of $US4,500 per kg equivalent. So I am expecting a large increase in value of trees flowing to a large increase in non-cash profit]

Maybe we need to wait for the vendors to finish their selling.