FXX / LLL Demerger, page-94

The big run up in our SP recently is going to give management a few choices in the upcoming IPO.

When FFX purchased 4.63m shares in Leo for $9.3m, it put a price on Leo shares of $2 as at 15th March when FFX’s SP was 79.5c

IMO this was to prevent dilution from the upcoming Entitlement Offer.

If that’s the case it would mean they plan to issue 18.54m (4 x 4.63m) shares in the EO based on them maintaining a 20% interest.

When FFX purchased those shares, it would have been based on their market valuation of Leo at the time, with the $2 price tag being worked out on the expected in-specie distribution ratio

Our SP is 95c as I type, so quite likely to be well above $1 after the Meeting when we see the full Prospectus.

This gives them a dilemma because for example if our SP is $1.20, that’s 50% higher than when they issued the $2 shares. So you’d expect them to now be valued at $3. (With gold dropping since March 15, you’d expect most of that rise attributable to the Lithium side.)

IMO they have 2 choices:

1) Issue the EO shares at $2 or maybe slightly more to raise their original expected $50m

2) Issue the shares at the updated market price of say $2.80 a share. That would raise an extra $52m on top of the $9.3m FFX paid

As the shares FFX purchased, the EO, the in-specie distribution are all the same class (rate the same) there has to be some accountability as to the price issued to us FFX shareholders.

Under both options the distribution ratio should remain the same, just the price that will change.

When they issue the SF prospectus we won’t see a price, just the ratio.

The only real difference it will make to holders is the price they pay for the EO, $2 or $2.80 in the above example.

You’ll still get the same number of in-specie shares, the market will give them a price when it 1st trades irrespective of the issue price.

Personally I can see them doing something in between option 1 & 2 to raise more $$.