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One of the issues overlooked with the warrants is that the funds to the company at the exercise price exactly cover the junior loan notes.
From the perspective of a holder of the JLNs, if the warrants are sold pre drill, then the company has in the bank the funds to repay the JLNs.
If it is not successful, then the chances of selling the warrants to cover the debts becomes zero.
We are only guessing, but I don't see IIs are going into this drill with such exposure.
Obviously, like us, they have done their dd and see the high COS, but they usually have a strategy to minimise their losses, as much as maximize their profits.
Just a different take on the warrant theme.
Hello BBN,
They are not selling the warrants, sorry I should have been clearer. Let’s say I have 450,000 shares, I participate in the offer and with it I receive 450,000 warrants at circa 40,47,57.
My original shares have all the risk like PIs, however my warrants are risk free for the 3 drills as I don’t have to take them.
I look to make 10% uplift for on my shares compared to the warrant strike price. So currently am looking at 52p and over for my 47/8p ones( which is happening now) later I buy my warrants and pocket the change or just keep the 10% and don’t excise if the drills aren’t successful.
I take no risk but all the upside as if the SP is 150p after drill 3, I still buy my shares back for 47p.
I would guess that all the players from the offer have a similar strategy if they had existing shares.
We can see today that when the bid goes over 52 we get a lot of sell orders pushed through.
Once it stops There’s a quick 20% to be made in my eyes. I am a holder here but also want to gain from this additional trade.
Good luck!!
I am acutely aware that we are attempting to define something that likely cannot be defined. It is merely fun to try to work out so my post shouldn't be taken too seriously.
I am certainly of the opinion that this i all about Lombard and that their actions of holding the price around the 50-55p mark would at the very least put off other potential warrant holders because the return on their warrants would simply be too limited to justify giving it away and having to commit t paying for them.
They are a free carry on the drill and until they deliver a healthy return I do not believe they will be introduced. Even the 40.7p ones were 'only' circa 30% in the money, which for me is the sort of minimum threshold we should expect. However, if so then where are the declarations. We haven't had a single one to date.
This is possibly because as I say they are a free shot at a very high return if the drills come in, so why waste them in and around 50p unless you are someone like Lombard who has a very large pot that was acquired at levels well beloe this and so can book circa 35-40% profit and not lose anything along the way.
Whatever the case I am sure this particular process will end abruptly and the SP will spike at some point because as I say the current price is very attractive and the closer we get to the drill result the more interest the chasm between the two points will drive.
@sankeys Appreciating it is all just opinion and no one but Lombard can really say what their strategy is, I would offer this.
To date since Lombard took ownership of 6,058,407 shares on 10th June for their £3m commitment to the junior funding, they have sold 2.02%, which equates to 1.89m shares.
Less than 1 month prior to this date (13th May) Lombard were increasing their holding to 13.14%, which was the position they were at when they committed to the additional £3m in funding to help get the junior facility over the line.
Given that they will have known that the drilling was due to commence by at the earliest mid July, it would be a little strange for them to be increasing if their intention was to then start dumping what is a big holding once the spud on what is a short drill period, began.
What that says to me is that they are more likely simply de-risking the £3m investment, an investment they clearly never planned to make, by either clawing back the £3m in order to leave themselves with a free carry element or by offsetting the £2m of warrants they gained for their funding.
For case 1 the target could be the £3m and the desire could be to achieve as high a price as possible in order to maximise the free carry share element. 1.89m at circa 52p average sale price (the evidence shows that the majority of sales have come above 50p) delivers around £981,000, so they are potentially one third of the way there.
If so and they keep to their strategy then there are another 3.88m shares to go at 52p average. That may seem a lot but as the drill result date moves closer it is not unfair to expect that the buying pressure will increase. If the drill takes the full 30 days, then there are around 18 trading days to go until the result, which is on average 215k of shares a day, which is nothing in the grand scheme of things.
In the second case the £2m of warrants at average 48.1p would be equivalent to 4.16m shares, which would mean they have circa 2.28m shares to sell over 19 days = 120,000 per day.
Of course their strategy may be a combination of both but in the case of the warrants it is a no brainer because they can sell 4.16m shares now knowing if the first drill is successful they can acquire them back at a guaranteed price, which they know doubt will, likely shortly after they have sold them for a tidy profit.
So for me the minimum target is 4.16m with circa 2.28m to go pre-drill, with the possibility that there is another £3m to go from the placement, but as I said before their apparent comfort zone was 13.14%. 4.16m shares equates to 4.59%, which when taken from the 17.92% = 13.33%. So not far away.
Who knows?There are many options and only Lombard truly knows. What I am certain of is that as a minimum they will sell those 4.16m shares because they don't need to take the risk when there are warrants guaranteeing them that stake later down the line.
top research that and at very least i see a ramp to 60p coming on spud news imminently. Therafter in 30days for well result of whether or not oil there and cements case for Liberator production well development at later stage.
All this with 3 more wells thereafter , all proving up the field and the 20k bopd they feel is easily achievable.
I think they might still go seekign JV partner after the pilot apprisal wells so they can ramp production even higher than 20k bopd.
All IMO , but whichever why it goes , this is a rare share that hase very little to no market/PR exposure right now and once it catches wind , the sp will be entirely different.
GLA
IT
Lombard have sold circa 1.9m shares since the offer, their first two tranches or warrants at 40 and 47 total 2m shares, so if they are just forward selling warrants then they probably finished yesterday. Or they may sell the last placing shares which is another 2m. Miton if they have continued to sell out would probably have around 1/2m left. If we assume that 40p warrants out of the 8m have been flipped already, and perhaps there’s maybe 2m more of the 47p warrants still to be forward sold.
Potentially then at the low end only around 3m shares to finish the overhang and at max 6m. Until of course the SP hit 60p plus and iis can flip the 57p warrants.
Hopefully the run into results and a successful pilot test will clear any remaining.