Clearly 55% is too low given the poor take up of the last buyback. My original thinking was that 80% of equity would be a fair result for PXUPA priority in the capital structure. However running the numbers the difference between 70 and 80 is only 16% upside forgone. However this increases PPX upside by 64%. It seems to be beneficial for hybrid holders to give up some upside in order to get a deal done. If both PPX and PXUPA can do a deal this will greatly benefit both securities in the following ways:
- Unlock the value in the business by allowing the market to properly assess the value of the company
- Allow investors to buy in who may be deterred from investing due to the capital structure
- Avoid negative publicity of class battles with activists - anyone remember 'Paperlinx Sux'?
- Removing management distractions and costs associated with dealing with the complex structure and activists
- Ability to reward management with shares that may have some value - aligning their interests with ours
- Possibility of returning value to shareholders via dividends over time
- Possibility of buying back shares at lower levels increasing value and closing the gap between price and value
We need a win-win situation in order to get us out this 'trench warfare' mentality
SRS Price at posting:
3.4¢ Sentiment: Hold Disclosure: Held
