This is the first thread I've ever started but I hope it will be of help to some people who are
struggling with the nuts and bolts of the SPP.
I think most people here are aware of the pending Share Purchase Plan but I've noticed
a great deal of confusion as to whether purchasing additional shares and (more particularly)
accepting the attached options would be beneficial to them. Indeed it seems that many folk
aren't too sure what to make of the value (or otherwise) of the "out of the money" options
which are on offer.
With that in mind I've given a basic explanation of the plan details and a range of potential
scenarios so that each of you will have some concrete figures to work with.
Share Purchase Plan (SPP) Basics
Record date : 7.00pm (AEDT) on 15th November 2016 (you MUST have been a SH at this
. point in time)
Offer Closes : 5.00pm (AEDT) on 20th January 2017
Issue Price (Shares) : $0.033 (3.3 cents)
Issue Price (Options) : Free on a 1:1 basis with SPP shares issued at $0.033.
Exercise Price (Options) : $0.05 (5.0 cents)
Minimum Purchase : $2,000.00 (60606 shares + 60606 free options)
Maximum Purchase : $15,000.00 (454,545 shares + 454,545 free options)
Expiry date (Options) : 31st December 2018
Issue Date (Share + Opts.) : 27th January 2017
Trading Opens : 1st February 2018
. (All dates Indicative and to verify all info please refer to Prospectus)
I've taken a base figure where you decide to purchase the minimum $2,000.00 worth of
shares under the SPP so that you can see to what extent it is or is not "worth it" under 3
scenarios which are all based around your own expectations of the XPE share price around
mid-2018. For larger purchases (eg$5,000 / $10,000 / $15,000) just multiply the results by
2.5 / 5.0 / 7.5 respectively.
I've chosen mid-2018 as that is around 6 months prior to the expiry date of the options
(let's call them XPEOC) and allows sufficient time for XPE shares to have grown in price
(if you think they will) and also allows enough time and flexibility to either dispose of them
via the market or convert to Heads.
All scenarios presume 60606 shares taken up along with 60606 free options held
until mid-2018 ignoring the value of other shares already held before SPP. It also assumes XPE
shares appreciate in value (if you didn't expect them to do this you wouldn't have bothered
with the SPP) and that once "in the money" the value of XPEOC will trail XPE by exactly the
strike price of $0.05. This will not be precise for (especially) scenario 1, or indeed any of
them, however for the purpose of the exercise it is presumed.
__________________________
Scenario 1 - XPE Price is at 5.0 cents mid-2018.
Cost basis = $2,000.00 (60606 shares x $0.033) + (60606 options x $0.00)
Value of XPE = $3,030.30 (60606 x $0.05)
Value of XPEOC = $0.00
Total Value = $3,030.30
Profit = $1,030.30 or 51.51%
In this first scenario the profit is wholly due to the SPP XPE shares as the XPEOC options are
still theoretically worthless, however in actual fact they are almost "in the money" so there
will be a small value due to the remaining time factor.
__________________________
Scenario 2 - XPE Price is at 7.5 cents mid-2018 and XPEOC "in the money" @ $0.025
Cost basis = $2,000.00 (60606 shares x $0.033) + (60606 options x $0.00)
Value of XPE = $4,545.45 (60606 x $0.075)
Value of XPEOC = $1,515.15 (60606 x $0.025)
Total Value = $6,060.60
Profit = $4,060.60 or 203.03%.
In this second scenario XPEOC is in the money and contributing strongly to the bottom line.
__________________________
Scenario 3 - XPE Price is at 10.0 cents mid-2018 and XPEOC "in the money" @ $0.05
Cost basis = $2,000.00 (60606 shares x $0.033) + (60606 options x $0.00)
Value of XPE = $6,060.60 (60606 x $0.10)
Value of XPEOC = $3,030.30 (60606 x $0.05)
Total Value = $9,090.90
Profit = $7,090.90 or 354.54%.
In these final 2 scenarios the XPEOC options are now earning profits at the same rate as the
XPE heads are, although of course their market price still trails XPE heads by 5.0 cents.
__________________________
Summary
Obviously, from our examples, the options must be in the money for them to be of
much value however if XPE surpasses the XPEOC strike price of $0.05 suddenly the options
become gold.
For every dollar profit made by XPE shares an additional identical dollar profit will come from
XPEOC, and guess what ? XPEOC are FREE in the SPP !
There's the value right there. They cost you zilch !
Normally the risk in options is losing it all if they don't reach the strike price (in which case your
Cost Price paid is forfeited)..... but here the Cost Price was ZERO... ie. zero risk.... zero forfeited.
On the other hand, the upside from these free options is pretty high.
Say XPE reached $0.20 by mid-2018. Your $2,000.00 worth of XPE from the SPP would be worth
$12,121.00.... Wowee huh ? Well right up there with them are those XPEOC that cost you $0.00.
They are now worth $9,090.90.
43% of your total profits would be from those XPEOC options. Not a bad FREE bonus.
Final Word.
In the end it comes down to three things....
1) Do you believe the SP of XPE will rise from here.... perhaps even over $0.05 ?
2) Do you want more XPE shares ?
3) Do you consider $0.033 a good buy-in price even ignoring any free options ?
If you answered "Yes" to all three then what are you waiting for ?
Hopefully these simple scenarios will allow you all to get your heads around the numbers
and make better informed decisions about the Share Purchase Plan and your involvement
or otherwise in it.
DYOR and refer to Prospectus for any details I may have missed.
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