No wonder everyone has trouble getting their head round it Transmeta this is a classic: ".....to Adobha Australia and Adohba Australia has agreed to purchase the Sale Assets in the name of its wholley owned subsidiary, Adohba Australia." Doubt a subsidiary has the same name as a parent company obviously a error but when even the company are confused about the deal what chance have of a successful IPO with new investors? Having three different Adobha does not help (think its three?).
"Adobha Resources Ltd (?ARL?) has been incorporated and, under the current proposal, will purchase from Gippsland the Adobha Project and Gippsland's 40% interest in the Heemskirk Tin Project, in exchange for equity in ARL. ARL will seek to raise sufficient funds to explore the Adobha Project via an underwritten IPO prospectus, with Gippsland shareholders to be offered the opportunity to subscribe for ARL shares on a pro‐rata basis."
Still confused when the music stops what stake will Gip actually have in ARL who will have hoovered up two world class projects for peanuts? "The issue price is assumed to be 0,2 AUD, means an expected value of 800 thousand AUD for GIP".
"The key point of the story, at least in my mind, is the fact that GIP will receive 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."
So say the IPO is at half Gip present market say Cap 14 million Aus so 70 million shares, Gip will get just 5 or 6 percent which could be diluted by further by capital calls if the IPO is a flop.
If of course the the spin off is a roaring success, most Gip holders who will not be able to afford to buy any shares can get a nice warm feeling as the few who can and the "underwriter" rake it in. Then if that does not cheer them up i guess the fact that the main Gip share could suffer without two of its projects would.
Sorry Transmeta something must have got lost in translation as if you are right the two projects are being given away and the IPO is bad for Gip.
Robert
AR1 Price at posting:
4.5¢ Sentiment: LT Buy Disclosure: Held
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