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Which tomorrow?
Cavalley have tabled a buy out of soundenergy. This will fly tommorrow.
Fasting finish es in 9 days time.
Which week?
Week coming up...
It's as close as that.
The relevant paragraph: (from June 13, 2023 press release) is the following:
"Conversion: convertible into Sound Energy ordinary shares at each tranche's fixed conversion price in whole or in part. Upon conversion, interest shall be rolled up and paid as if the Convertible Notes were held to the redemption date (being five years from draw down), with such interest convertible at the lower of the applicable fixed conversion price and the average of the five daily VWAP calculations selected by the Investor out of the 15 trading days prior to the conversion date."
The total amount of interest subject to conversion is:
£2,500,000 X 15% X 5 years: £1,875,000
Of that amount, £ 300,000 were already converted (as per March 28 press release), £1,387,500 could be converted at any time (because the principal have already been converted) and £187,500 will be converted after the conversion of the £ 250,000 principal debt outstanding (see March 28 press release)
I would like to know what SOU´s institutional investors (Afriquia Gaz and OGIF) think about this highly dilutive deal.
Regards
Kylie must have a small winky dingy
That was supposed to say Trainspotting ,you know those very weird people you see on platforms around d the country complete with notebook and a very keen eye on trains , nothing wrong with it at all as if its their bag then knock yourself out
Crude and Turnoff the lights
That is a pretty accurate assessment and a good point , it's Sunday and the market are closed and he's posting on Ester Sunday ,my reason for posting is that I'm on watch in the middle of the north sea and got bu55er all better to do .
Mr Kylie he does point out some truthful facts indeed as its not looking good for Sound financially as Mr Ps pretty well summed it up but his reason is that he could be a , lonely , miserable,only child, narcissist, unbelievably boring, spoilt, coward, very small in height and stature, absolutely a bully ,transporting weird git , I'm going for all of them so pick and choose which one you think he follows
I have no idea of what he says as he's on ignore on my page but as I have already stated. this is his bag , this is what gets him off
I wouldn't look to deeply into it Crude, reality is he's got nothing better to do. Markets are closed for 4 days but he's posting on here first thing in the mornings. I don't even get pleasure teasing him about it anymore.
Kylie, you say & I quote: "Being a shareholder in SOU must feel like the most toxic Groundhog Day". Prety compelling evidence that you are not a shareholder. So why are you here? By your own implied admission you have no financial interests. What do you gain from posting here?
Being a shareholder in SOU must feel like the most toxic Groundhog Day. Time after time people fail to read or understand the nature of RNSs, read between the lines and comprehend not only what’s said and how, but more importantly what isn’t. Time after time they realise all too late management have lied, been opaque, been incompetent and risked only SH money, honestly how many times can it happen? Again the lower the price goes now the worse the dilution. The 30m is at 1p, the remaining 1.4p could be at 0.5p or 0.2p in which case 30-50% of the company is given away. And yet like absolute mugs the SHs here listen to moronic posters who insist day after day news is imminent, their nan knows a cleaner who heard so from GL’s cousin, all the while GL just mugs them off. Like I said interesting short week ahead in the funny farm. Added to which, 6/7 weeks from GL’s rousing bs video, nothing. Absolutely zip. You lot are being taken by the nose by another snake oil salesman, all the way to the slaughter house.
I wonder did GL think that Calvalley would come through earlier? With the Phase 1 back money the convertible notes could have been redeemed at 110% plus accrued interest which, while painful, would have been been much cheaper than paying ALL the interest. I presume he knew the risk he was taking. Maybe he just didn't have a choice. (I'll discount the possibility that he just didn't care).
No matter what happened, the note owners were on an incredibly sweet deal at the expense of shareholders. Worst case for them, SOU can pay the money back early and they pocket 10% plus accrued interest after maybe just a few weeks. If the share price goes up they can convert and dribble shares onto the market, making a profit on the shares AND collecting 75% interest on everything converted. And if the share price goes down -- as it did -- they can convert and buy new shares at a massive discount with their 75% interest.
Almost immediately after the convertible notes were issued in June the share price began to nosedive, allowing the note holder to convert large tranches in July, September, October, November, and now again in March. The holder can cherrypick the worst five days in a three week period and convert the interest due to shares at that price. In December we saw that puzzling RNS which indicated that Afriquia's share of the company was falling. Little did most people suspect that EVERYONE's share was falling due to the loan note conversions -- only Afriquia were obliged to report it.
It remains to be seen exactly how things pan out. But this horrendous loan along with the ongoing unexplained delay with Calvalley may just end up costing SOU one sixth of the company for a tiny pittance. I'd love to see GL explain this disaster to shareholders in a proper open forum instead of a selective Q&A. Only once to my knowledge has he hinted (in a recent interview) at how hideous the financial situation has been during his tenure. A bit of straight talking would be appreciated. However, I guess that's not what CEOs are paid for. He's supposed to rally the investors, not spook them.
Actually, hold that thought. It's much, MUCH worse than even I imagined.
The notes investor will be taking their principle PLUS 75% interest and buying at a little over a penny per share. You can see that in Thursday's RNS ... 30 million new shares issued at 1p but an eye-watering £1,387,500 of interest still outstanding (as well as £250,000 of principal). That's another 140 million shares to go at 1p (on top of the 140 million already issued) and still a sizable chunk of principal and associated interest that could be converted. By my reckoning the final tally could be just shy of 350 million shares if the investor has enough time -- there's a limit on how much they're allowed convert in a calendar month. (And can I just say, it would be a very happy "coincidence" for them if they were to manage to cash out the last remaining notes in April or May just before Calvalley comes through).
The note owner will have gotten 75% interest and spent both it and the principal on shares at around 1p. If they can sell into a rise they could end up with 350% of their initial investment after a year. The perennial rampers on here will cheerlead the crowds into buying this crud, and the hapless LTHs will not only not notice that they've already been diluted another 18%(!) but will be left holding a shiny new turd as well.
I can see the scene being set for a classic bull trap. When the Calvalley news breaks (assuming it does) people who wouldn't buy shares at 0.8p will be rushing to buy them at 1.8p. After all, we're on our way to 4.6p and well beyond that according to some. Of course, there will be lots of people looking to exit along the way, breathing a sigh of relief that they got out intact. They're the lucky ones with the low breakeven prices.
But ahead of all of this posse will be the convertible notes investor who has been buying newly minted shares at low, low prices. By the time of the temporary spike they will be the proud owners of 150 million shares which they will dump on those panicking to buy into the rise. I mean, why wait for five years at "only" 15% pa interest when you can make 100% in ONE year.
Guess who's going to be left holding the baby?
Any particular Tuesday?
From Tuesday.its up and away we go.
It's a very nice spring morning in my neck of the woods. Hope all are enjoying their Easter break... I would normally say gla but it's now a given that the price will go up.
(Imo) haha.
There’s no positive spin that can be put on the last funding round. Either GL and GD got completely rolled over (I mean Jesus, the ROI on the lender is eye wateringly good at SH expense) and they just couldn’t fathom how bad such a structure could be, or they were so desperate of running out of funds they had no choice. Which is it? I completely agree with the last poster, as is GLs MO he’s not open obvious or transparent. That RNS hid in various convoluted ways the true horrible extent of the financial impact of the raise. For obvious reasons, but it’s underhand sneaky and distrustful at best. Why is all this happening? Well it’s merely a window or two into the extremely precarious state of the company and the outlook for existing SHs in particular I fear. History does repeat itself time and time again, and this company is full of punting PIs hoping against logic, history, objective analysis and the blindly obvious that a one in a million rabbit will be pulled from the hat by very sub-standard management. I very much doubt it.
Have to admit I've been confused about these loan note conversions. Had to go back and reread the detail in the RNS from last June. Main point of confusion was why the investor would be converting the notes to shares at 2.25p when the market price of shares is much lower.
https://www.lse.co.uk/rns/SOU/issue-of-convertible-bonds-and-issue-of-warrants-j2mdirm7ar0ldh3.html
If I'm understanding it right, when the loan notes are converted the entire interest that would have been due over five years becomes payable (at a shocking 15% pa). Furthermore, the interest can be converted to shares at a weighted average of recent daily prices. So basically they take a hit on the conversions at 2.25p but then they get 75% interest which can be converted to more shares at 1p. Shares end up costing about 1.1p, a bit higher than market, but they would never have been able to buy tens of millions of shares on the open market at that price. (Open to correction on my logic and arithmetic here).
What a truly horrible deal for SOU (or, at least, its ever more diluted shareholders). As a sign of how over a barrel they were back in June, even the fees associated with the issue of the loan notes were paid by way of new shares in lieu of cash to SOU's financial advisor and the investor, plus a ton of additional warrants to both.
The thing that's REALLY puzzling me is that the £2.5m in notes was just the first tranche of a total of £4m which SOU said would provide working capital through the end of 2023. The second tranche worth £1.5m never materialised because it was conditional on a minimum share price at the time of drawdown which wasn't met. So how are SOU still going if they were short £1.5m at year end and we are now a whole additional quarter in?
Total shares on issue have now gone from 1.86 billion to 2 billion -- a dilution of about 7% -- and we are not done yet with the loan notes. All to fund just a few months of working capital. With the share price at an even lower ebb now, and the prospect of another raise seemingly inevitable, what's the hit going to be? GL is not a straight talker when it comes to this. Look at the 13-Jun RNS in detail. The implications of the loan notes are strewn throughout different parts of it as if to be intentionally obfuscatory.
It's so frustrating and disappointing to see SOU value trickling like water into desert sand. Meanwhile, everyone's focused on Calvalley and twitter pics of LNG tanks. I've been saying to watch the creeping dilution for the past couple of years now. It's still the elephant in the room.
To be honest, the potential effect of a higher bank loan rate on the NVP is the last of my worries for the time being.
Other urgent issues come well before that: the delays in the execution of phase 1 and the closing of the farm out deal, the lack of cash, and the risk of further dilution in the short term.
Regards
Fernan10 - I might be wrong but from what I see / recall the bank loan $260m ish did not when announced have an interest rate agreed yet, and I think still hasn’t. If that’s the case the current valuation can’t take that final interest rate fully into account, right? I seem to recall SPA specifically highlighting this back last summer/autumn, like it was a caveat to the 4.6p. I might be wrong, but if I am it would be good if someone can show or prove so.
Who do you believe KTF buying down and underwater or Directors not buying ? It’s as simple as that.
You said:
"By the way, the last 4.6p valuation from the increasingly marginalised SPA excluded any interest impact from a phase 2 bank loan (as that was conveniently omitted nearly a year ago when initial terms were shared)"
You are wrong here: the 4.6p valuation is a NPV, calculated taking into account future fund flows, discounted at a given "weighted average cost of capital (WACC)" rate. The bank funding rate is part of the WACC.
From the analyst note on Oct 4th, 2023:
"We value Sound in the same way as we value all our E&P companies, with Risked NAV as the primary valuation metric. We do this by modelling a Discounted Cash Flow (DCF) model of the key assets in detail, taking the Company’s net effective interest and applying a risk factor. For Sound, we use the DCF valuations for both Phase 1 and Phase 2 of Tendrara and an evaluation of the Company’s assets and liabilities to calculate its Core valuation."
On the other hand, you are absolutely right about the dilution effect from the conversion of the interest of the convertible notes issued last June.
As per the latest press release, there are £1,387,500 interest charges remaining outstanding, that could be convertible as they are making due, until the end of the note period. That could potentially lead to an additional 138.7 million additional shares, at today´s price of c. 1p/sh
Regards