The warrants convert to shares when the refinancing is due.
The conversion to shares depends on the uplift in market capital from 29 April 16 to the date when the refinance or maturity is due.
The market capital on 29 April 16 was approximately $100 million.
Assume the market capital at time of maturity is $200 million implying a share price of 60 cents, then the uplift in market capital is $200 million - $100 million which equals to $100 million.
Therefore the banks are entitled to shares worth 0.0625 x $100 million which equals to $6.25 million. Since we assumed that the share price had only gone up to 60 cents, then the number of shares that the banks will get is $6.25 million divided by 60 cents which equals 10.4 million shares. Divide 10.4 million shares by 352 million shares on issue and you get 2.95 % dilution.
So now if you use the same calculation for an increasing share price, you will find that the dilution of 6.25% or 22 million shares will need a share price north of $2. Anything less will diminish the dilution but also means less upside for shareholders because the share price is lower.
The maximum dilution will never exceed 6.25% no matter how much the share price increases.
SGH Price at posting:
44.5¢ Sentiment: Hold Disclosure: Held
