Hi
The record date for the Loyalty options is 5 pm Friday 6 Sep so expect the SP to be supported until then.
So here on HC some have announced buying up until that date and selling after as a tactic to basically effectively get a call option, to be exercised above 55c until Sep 2025. It will be interesting to see the market for the SP in the weeks to the rest of Sep.
Wonder how many buyers will turn up without Loyalty options attached as it is for the next two weeks and just how many sellers are going to do the call option tactic by selling after that record date.
Just playing to understand the numbers and therefore to understand the logic involved by just working with parcels of 40,000 shares,
Bought 40,000 TLG today at 39c. Cost $15,600. Hold to record date 6/09/24 to get 5,000 loyalty option
Sell 40,00 TLG in the week 9-13 Sept at roughly 10% discount to buying price so 35c for $14,000 with a tax loss of $1,600 plus brokerage in and out, so lets call it $1,700 in total.
So the cost to you of the each of the 5,000 loyalty options is ($1700 / 5000) so 34c each.
That sounds high at first, however if your carrying a capital gain for which you a liable to pay tax then for each parcel you purchase there is a $1700 CGT discount. They effectively cost you nothing because of the tax saving.
Even if the market drops 20% post record date to 31c and your carrying a capital gain that just means that your getting for each parcel a $3300 CGT discount,
Of course the 34c per loyalty option is highish but still a discount on current price of 39c for those without a current capital gain. However let imagine that SC decision arrives and the SP surges to 1.05 before the end of the financial year and you exercise the options at 55c and sell the shares at 1.05 on the 30 June. So a 50c gain on each exercised share. Your are liable for a 50c capital gain for each share because your not a long term holder, so not a 50% discount. So effectively $2500 is added to your marginal tax rate, However your carrying a $1700 capital gains loss so only $800 is eligible for CGT.
if the SP surge doesn't happen and the loyalty options expire worthless, your can still carrying forward a $1700 capital loss forward to be used at a later date if things come good.
So you can see why some are prepared to play the game. In the coming two weeks we may even see the SP into the low 40's because of the demand for shares to play the game
So the 2nd, 3rd and 4th week of Sep could prove interesting to watch. I am expecting a drop below 39 it's just a question of how much.
Just me playing with the numbers so DYOR.
cheers Lies.
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