ipo not bad for gip

It took me quite some time to understand the construction of the deal (the IPO). As a summary, the deal to me looks not bad for GIP.

GIP has a 100% daughter, the Adobha Eritrea company. Of this company, GIP will sell 80% to the new Abdoha Resources (AR) company, for which it will get 4,4 Mio in cash (its up to GIP to use this money for any progress in Egypt or in Eritrea). In addition, GIP will transfer it`s interest (the 40/30%) at the Heemskirk tin project to AR, for which it will get 4 Mio shares of this new company. The issue price is assumed to be 0,2 AUD, means an expected value of 800 thousand AUD for GIP. AR will transfer this interest to it`s own new 100% daughter (Abdoha Australia), but this doesn`t matter for GIP.

The key point of the story, at least in my mind, is the fact that GIP will recieve shares of AR. In other words, if the market means that AR got the tin interest for a too low value or that the 80% of the Eritrea project should be worth more than the 4,4 Mio, then the share price at the IPO of AR or later on will be higher than the expected 0,2 AUD. In this case, GIP will in total get more than the 5,2 millions, as they were calculated right now.

In other words, in the future GIP will still gain from any success of the projects in Eritrea and in Heemskirk due to its shares from AR. The two projects are not just given away from GIP!!

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