Hi Cityfan. I am a LTH of GKP shares. This does not make me anywhere near an expert on trading them - especially in potentially critical moments. I am very confused and have been for a while with regard to how the different 'what-ifs' play out hypothetically. My attention was drawn to your comment on dilution effects and I want to ask you the following question. On the premise that dilution will, to some degree, take place, if that caused the SP to 'temporarily' drop in value, then the beneficial thing to do would be to sell now and buy back in at a lower price, would it not? Is the reason some people are not doing so because they believe there will be a risk (once the restructure is completed) of not being able to buy back in before the price has shot up due to thousands of buys? If not, if one believed the SP would drop due to dilution, why on earth would they not sell now?
I note that you say dilution does not work that way in any case, and I would be grateful if you would explain for me exactly why. And what do you feel might be the worst scenarion for we LTHs? Thanks in advance. Good luck to us all.
The company has, to the best of my knowledge and as detailed in the AIM Admittance Document of Sept 2004, the ability to issue up to 60,000 Preference Shares of nominal value $1,000 in addition to the $0.01 Ordinary Shares in issue.
just maybe the KRG/MNR knew the IMF money was coming through and told JF as much, oil co's in Kurdistan get paid ALL monies due and JF is negotiating a haircut for bonds due 2017 leaving enough monies to take us to at least 55kbpd. Further dilution for shareholders would be a wipeout from these levels as would any offer for the company.
If the Company had no costs or debts to cover then I take your point that the extra £50 raised would go on the Cash line of the Company's Balance Sheet. Unfortunately, when a Company is running at a loss any raised funds will get eaten up by Running Costs, paying Debts etc.
In the £50 example then maybe some of the Cash will still be on the BS, and the Shares wouldn't fall all the way to 16p. Maybe they would only drop to 30p or 40p- what the price- but it will still be a drop from £1 a share.
The extent of the drop depends how much the Market believes that the Cash will be spent wisely and re-invested to turn a future profit. Based on this Boards review of the BoD of GKP I would suggest the market will think that any raised funds is just throwing money away and so the dilution will see a significant drop in SP.
All just IMHO of course. But that's my tuppence worth.
In the case of dilution, which is what will happen here, if for example a debt is £50million, the bondholders convert the debt into a % control of the company at a heavy discount to the share price. For example, they ask for 80% control of the company at an sp discount of 80+%. The existing shareholders see their voting power diminish by the same. So the £50million is no longer hanging over a company's head, but as a consequence existing shareholder value is decimated.
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