Parity Share Price (PTY)

I'm starting to think that there may be call on some or all of the £2million from the purchasers. There was provision for this if they found nasty stuff

As detailed in the announcement dated 21 November 2023, GBP1 million has been retained by the Purchaser to set off against the expected negative working capital position of PPL as at Completion and other minor adjustments. That working capital position will be determined from a set of completion accounts that will be agreed following Completion. To the extent that PPL's negative working capital position at Completion is less than GBP1 million, the difference will be paid by the Purchaser to PHL and to the extent that PPL's negative working capital position at Completion is greater than GBP1 million, the difference will be paid by PHL to the Purchaser.

Could be significant value here, clean cash shell with £2m plus cash…dyor

Note that the RTO route may have attractions to the IPO route that may give it additional 'value' to a company wishing to float:-

• A requirement to give away less equity than in an IPO.

• Potentially more speed and certainty - an aborted IPO due to market conditions could be very expensive, and time is money.

• The 'shellmeisters' may also have attractive business acumen, contacts, and 'clout', that may be attractive to the floating company.

Remember that if the company floating is valued at hundreds of millions, then a shell value of a few £millions may be just 1% of the expanded equity, which is comparatively insignificant.

There have been some shell-RTO deals signed relatively recently where the shell has been valued at multiple times its cash balance, and multiple times the value of its original market cap. at the time it came to the market.

The positive aspects are that this business sale removes the perceived risk of PTY going bust, and creates a very attractive cash shell: with a low market cap., good cash balance, and capable directors ... and at an ideal time.

Poor stock market conditions tend to make it harder to IPO, increasing the attractions of the RTO (reverse takeover) route, and increasing the bargaining power of listed shells.

And meanwhile, the valuations of RTO targets for shells tend to be depressed.

So in summary, listed shells are in effect becoming more valuable: more capable of cutting a cracking RTO deal on great terms - i.e. a better shell valuation and lower target valuation, and great quality targets.

Moreover, listed shells are a great place to 'park funds' at the moment.

Many investors may wish to reduce their exposure to shares in companies with trading businesses, but holding cash for months doesn't give any real direct upside - certainly in the short term.

A PTY shell though will have both cash underpinning, and great potential upside - it could easily double or more from this level on a good deal.

And you don't have to worry about funds being tied up here for a while if you won't be using them anyway.

I was certainly hoping for a lot more (not that the share price was really factoring in anything more), and the buyer looks to be getting the business very much on the cheap.

But unless this deal quickly flushes out a fairly definite bid at a significantly higher price, this deal will very likely go through.

But a rival bidder would have to move quickly, as this deal looks to be being rushed through:-

"The proposed Disposal is subject to shareholder approval at General Meeting of the Company to be held on 7 December 2023 at 1:00 p.m."

https://www.lse.co.uk/rns/PTY/proposed-disposal-of-ppl-and-notice-of-gm-eccz5a1vycic7x8.html

Presumably this is a situation that only requires 14 days' notice:-

"If the directors of a listed public company call a general meeting, they should give at least 21 days’ notice except in certain situations."

https://www.rocketlawyer.com/gb/en/business/run-a-private-limited-company/legal-guide/general-meetings#:~:text=When%20can%20directors%20call%20a,21%20days'%20notice%20is%20required.