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26/05/22
13:32
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Originally posted by Red Baron:
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"Anyone care to offer a reason why we are at 94c right now? " I assume most buying this week and next, will be doing it in order to hold Leo So you really have to look at it from their point of view. Firstly, they are paying 95c to get 71.4% of a Leo share (1 / 1.4) or 50c worth (assuming 70c/share) So they are tying up a fair bit of capital Secondly, they are weighing up whether it's cheaper to buy FFX now or buy Leo when it lists. Assuming they are only interested in Leo (not the gold) they need to know how much they can sell FFX for when it goes Ex Entitlement. I'm assuming they'd base it on selling in the 1st week. As I type our SP is very close to the 96.5c price they based the demerger pricing on They valued the Gold side at $402m, gold & the market has dropped since then, looking at some of our gold peers like TIE, assume the gold side now worth $360m. (30.5c/share) We'd own 20% of LLL worth about $167m (14c/share) based on LLL being 70c They'd realistically value FFX at 44c post demerger. (30.5 + 14) Realistically with all the sellers in the market, they may only get 36c Remember this is based on a LLL price of 70c, if you think it'll list above that, FFX becomes more valuable. If they can buy FFX for 96c presently & sell for 36c post demerger, they are paying 60c for 71.4% of a LLL share. That implies an 84c price for 1 Leo share, giving a market cap of $1b So at present prices, you are better off buying FFX at 96c unless you think you can buy Leo at or below 84c when it lists.
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To follow on from your analysis , am I right in saying the breakeven point is 90c, that is to say buy FFX at 90c you will breakeven on day 1 if FFX trades at 40c, and LEO trades at 70c I should have purchased FFX at 82c when the opportunity arose but I did the math far too late. yes I did participate in the priority issue and shortfall