Re the underwriting by Ord Minnett of the Chemeq rights issue. It seems to me that many people are thinking the company will not get the needed $$$ because the s/p is currently out of the money. Firstly the money is now guaranteed because of underwriting. The move by Ord's and CMQ to include attaching free options was a stroke of genius, because even if the shares were $2.20/$2.35 on or close to the last day for acceptances ie 27 Sept 2004 shareholders, imho would probably still kick in a reasonable amount to obtain the attaching option. If they don't, and Ord's are left to pick up the shortfall after Dr Melrose put's in his $1mill sub underwriting component over and above his $5.4 mill rights issue commitment,Ords will then have free options to make money on down a track at a time of their choosing. In a very short time after the dust has settled Ords, can simply drip feed into the mkt left over $2.40 shares, or use their resources to place same with some institutions at a discount to mkt. Let's be honest, we have have all seen this happen before. This scenario is all very workable if and when the tide turns for Chemeq, and I know it will. The recent selldown is imho irrational,especially in view of the company having money to probably survive for 6 mths or more, whiles't getting the show on the road and making a go of it.The other big plus about these options, is that additional money will be forthcoming on before 30 June 05, which will enable the completion of the extra 30 tonnes of production. The prospectus shows that total cost of AP-1 capacity to 50000kg per annum is estimated at $22mill,of which $10.3 mill has been spent todate. In other words, they only need an additional $11.7 mill to complete this facility. These options will ultimately raise $20.4 mill. We should not forget that there is still approx 3.5 weeks to go before the s.p becomes an issue in relation to this rights issue, and who ultimately provides the $20.3mill. WR. TU PS. I must say how much I admire Dr Melrose for his efforts todate, and his total financial commitment to this company. He is guilty of only one thing, and that was possibly trying to advance the company a little to quickly (he is on record as saying they are probably 3 years ahead of where they otherwise might have been) and subsequently got caught with unexpected construction delays etc.Long-term shareholders will ultimately be the beneficiary, as will this great country of ours. Pity about how alive our tall poppy syndrome is. At 70 years old, he has a natural right to be on the golf course chairing a great company while a yet to be appointed new ceo does all the hard yards, because the good Dr certainly has a lot to be proud of.
CMQ Price at posting:
0.0¢ Sentiment: LT Buy Disclosure: Held
