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Administration vs. Massive dilution, one would think there is 26pct shareholding (i know atleast 10pct) who know that SF has more to lose from an administration, and could demand better terms. This is a complicated one
@4C - Indeed they would need shareholder approval, but I imagine if that is the scenario, they would easily get approval. If I recall correctly, they would need 75% shareholder support but faced with the alternative of administration, they would easily get the shareholder support. It might all be bumping up against the 31 DEC 2020 "deadline" but with a path forward clearly set out, it would just be a formality for the banks to extend by a month or two to get it all closed and funded.
It would also mean Mazroui and Horizon injecting capital of $15m to maintain their % which I am not sure they want to do. They can ofcourse inject capital at a higher valuation (i.e. less dilutive terms for e.g. at 22p) and making it easier for anyone to maintain same ownership levels.
Not sure how they could raise 75m from anyone without a shareholder approval. However, if you remember, one of the agenda at the AGM was to give the board the power to raise capital without getting shareholder approval. Perhaps they will go this route once the new board is in.
The result of today's vote was of course signaled two weeks ago so nothing really new in today's RNS. My overwhelming hunch is still that SF and friends are forcing the company into raising the $75m from themselves and/or some other sort of similar transaction e.g. reverse merger. That wouldn't be ideal for other existing shareholders as it would be at a dilutive valuation, but so would raising $75m through the traditional rights issue process. All still better than the administration scenario and we would still have exposure (albeit diluted) to the recovery story. Of course, one can mitigate that dilution by snapping up an implied pro-rata amount of shares once SF's intentions are clear.
Personally I dont see anything encouraging in the RNS release today:
"On 8 October 2020, the Company announced that as a result of Seafox International Limited's recent actions, having taken advice from its financial adviser and having sought feedback from its corporate brokers, it is currently impracticable to proceed with the Equity Raise and that, therefore, there is no reasonable prospect that the Equity Raise can be completed prior to the end of 2020.
In the absence of the Equity Raise, and if the Warrants are not issued by 31 December 2020, the Company will be in default under its bank facilities. If the Lenders enforce their rights, the Company could be put into administration and shareholders could lose the entire value of their investment."
I think (and hope) they have just been causing disruption to stop the board turning the company around and completing the equity raise. If the BOD had been free and focused to do so then the share price would be north of 30p and SF would have to bid considerably more given the positive platform the BOD would have created. Whereas now, if they bid 22p a lot of shareholders would sell through boredom !!
Also this assumes that Mazrui and Horizon (who have been voting with SF and are roughly 20%) will benefit elsewhere with SF to the tune of 22p/share (if they are not dumb, they would have asked for more). So that leaves screwing the remaining 50% of shareholders to drive the company into bankruptcy to pick up assets on the cheap that you are not sure of? Possible, but odds are low
Along with what AA2020 pointed out, the other options are:
1. Renegotiate with banks to avert bankruptcy (banks already said no, but that will always be their stand) . In this case, frustrate existing shareholders and they come back and bid at lower price in June 2021. In this case, you should also assume that nobody else would come and bid for the asset at a higher price before that :)
2. Reverse merger with SF creating a stronger company (why wasn't this presented to the board already?)
3. Buy out remaining shareholders at 22p
4. Capital raise from SF at dilutive valuation (again they have to compensate/pay Mazrui and Horizon elsewhere)
5. Hope and pray that ADQ crashes this party
If you know the outcome, you will either sell down completely, or load it up to the hilt
Gruff, you possibly have a better idea of how many sharks might be circling in the water around GMS and I truly hope you are right when you hope for something sensible to be the outcome. Personally I've seen very little sense in what SF have done recently (e.g. hokey kokey with the board). I've sold my meagre holding for a small loss, but will continue to watch with interest.
Potentially a risky strategy, as they would not be the only interested party in the asset sale, plus they would lose their equity investment along with their co-voters, who apparently are voting completely independent of each other!!! Sure.
I hope they come up with something sensible at the end of Nov and we can all move on. They're just too disruptive for this to be the BOD turnaround story I had hoped it would be 18 months ago.
I suspect SF will be happy to see GMS fall into the hands of a liquidator and then pickup the assets / business commitments for peanuts. I have to say the way that SF have handled this leaves a nasty taste.
27th or 28th November I think
Anyone remember what the date is that SF are free to put in another bid? Assume they want their people on the board in advance of this date - if bidding remains their strategy that is
50.2% of outstanding shares voted against the warrants. Next one on board changes is on the 10 November.
Will they call another General meeting to reinstate Heikal onto the board? SF is keeping board/management busy by calling general meetings :)