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Doubling the Nominal Share price will as you say halve the number of issued shares, thus doubling the value of those shares. See examples of this below:
Nominal Price = 25p Share Price = 2p Difference = 23p
Nominal Price = 50p Share Price = 4p Difference = 46p
Nominal Price = 100p Share Price = 8p Difference = 92p
The effect of this is to greatly increase the difference between the actual and Nominal share price. This makes it even more impossible for the company to issue new shares, as they conceded in the RNS. Is that what the BoD consider to be an orderly market?
"The Directors consider that the number of existing Ordinary Shares is not only unwieldly in volume for a company of
Advanced Oncotherapy's market capitalisation, but when combined with the prevailing share price, is not conducive to an orderly market. "
The wording is so similar to their statement in 2016 when they divided the number of shares by 25, that the only conclusion I can draw from it is that they will not be content with merely halving the number of shares this time, either, as that would only increase the share price to around 4p. I believe that the BoD wants to increase it to far more than that.
"A new nominal price of 50p could be created, existing shares would halve in number, then the £100m could be raised at 50p. Exactly the same outcome. Indeed the £100m could just be raised at 25p with exactly the same outcome."
The company could indeed issue new shares after a 1 for 2 consolidation at 50p, or indeed now without the consolidation at 25p.
The problem is who will buy these shares that are priced more than 10 times higher than the last trading price before suspension?
I believe a significant reduction in the number of share is on the cards. Going on the wording of their statement and the similarity it has to their statement in 2016 when they reduced the number of shares by 25 times, I expect a reduction of a similar magnitude now. That would make the share price somewhere between 40p and 50p. I've tried, and failed, to work out what effect that might have on the rest of their plan.
Actually I’ve realised what I set out is rubbish. There’d be no need for all those steps. A new nominal price of 50p could be created, existing shares would halve in number, then the £100m could be raised at 50p. Exactly the same outcome. Indeed the £100m could just be raised at 25p with exactly the same outcome. It would make more sense if existing shares were written down in some way or not altered as the nominal price changes, but I believe that does happen.
Curious, I totally agree that the mcap will be restored to a sensible place after the recapitalisation, if it happens. When you think the mcap was north of £100m a year ago, and now the debt would have been repaid with £60m in the bank. But the markets are weird at the moment.
IWTO that is a possibility however that would make the total number of shares even more totally “unwieldy” in the words of the directors. It is the only comment I find personally the most revealing, for that reason I expect as we move forward total shares issued will be less than today just depends how much.
With support from perhaps another major investor / current investors I believe all realise at this 11th hour and technically de risked position the shares are worth much more than the current market cap. Time will tell and I expect to hear a concrete plan by the end of July. GLA
Curious, thanks for your calcs but I think the existing shares need be adjusted for the new nominal price. How about:
Company decides on new nominal price - say 5p - and raises equity at the same price. £100m raised to cover all debt and ongoing requirements. That’s 2bn new shares. But the existing 543m shares are the subject of a share split and are turned into 2715m shares at 5p (ie 5x because the new nominal price is 5x lower than current nominal). So now we have 4715m 5p shares in total.
This is too many so a 1:10 consolidation results in 471.5m shares with a nominal 50p price. Existing shareholders retain a decent percentage of the company (>50%). Does this look right?
But here’s a thing. For the new investors not to lose money on day one of trading the market price needs to be 50p. (They now have 200m shares effectively issued at 50p). So that implies an mcap of more than £230m. Really? And, btw, the resulting mcap and proportion of the company held by existing shareholders doesn’t change whatever the new nominal/issue price. Try it. Happy to be corrected in all the above!
I have been thinking about this Share consolidation and it is interesting with AVO's proposal that it will be followed by a subdivision/Share Split: being the opposite of a share consolidation, increasing the number of outstanding shares while proportionately decreasing the share price, usually done to make the shares more affordable and increase market liquidity. Which is clearly the only reason to move forward on this basis as no new issues will be issued at the prevailing nominal value of 25 pence.
As I understand the purpose of using both share consolidation and share split together would be to also sort out any convertible securities and adjust the nominal value of the shares simultaneously. Therefore by consolidating the shares first, the company can convert the convertibles on a consolidated basis, ensuring a more accurate conversion ratio. Then, through the subsequent share split, the nominal value of the shares can be reduced.
So hypothetically how could this work especially seeing the comment AVO make about the number of current shares?
“The Directors consider that the number of existing Ordinary Shares is not only unwieldly in volume for a company of Advanced Oncotherapy's market capitalisation, but when combined with the prevailing share price, is not conducive to an orderly market”.
So lets say they consolidate 10:1 and then assume a share split 1:2
If they are going to raise lets say the lower amount of £61.7 Million are they really going to be able to issue new shares lower than 20p??? they will still end up with 417 million shares versus now 542,573,869
Possible Equity Issue Price: 20 pence
Number of New Shares Required:
Total Equity Fundraising Amount / Issue Price for £61,700,000 @ 0.20 = 308,500,000 shares
Share Consolidation and Subdivisionn
Share Consolidation:
Assuming a consolidation ratio of 10:1, : (Even at 20:1 does not make a huge difference to overall sharevolume)
542,573,869 shares / 10 = 54,257,387 shares
Subdivision/Share Split:
Assuming a 1:2 share split, :
54,257,387 shares x 2 = 108,514,774 shares
To achieve the equity fundraising goal of £61.7 million, the company would have:
308,500,000 + 108,514,774 = 417,014.774 Issued shares
This is all hypothetical but I guess my point is focusing on the 'unwieldly' volume of shares and therefore perhaps unlikely to see an offer price any lower, which for all shareholders is very good news. If through this combined action they can also take out Odey the share price could do very well combining a capital raise which should be suffcient to totally complete all certfication and finally treating customers.
All thoughts welcomed, at the end of the day I just want the company to succeed, both as a shareholder and for the good of mankind.
This is a good point - the Recapitalisation Plan provides AVO with leverage in sale discussions. If they can say “look - we’ve got commitments to investment of c£100m, which will mean we have zero debt, c£60m of cash and a great proposition” then the sale price will have to reflect that. And would be well north of £100m, I reckon.
No need to apologize Meldrew44, I don't think that AVO really know what the plan is either. To me, this looks like they have thrown a load of ideas into a hat, and are waiting to see which ones will be picked out.
Kenj.
I apologise for not explaining my thoughts more clearly. However, I suspect that we might be close to finding out what AVO intends, so any further attempts by me to explain my view of the situation are likely to be overtaken by events. It will be what it will be.
"Maybe they want to consolidate first, so not having to change the '25p'nominal share setup?"
If they consolidate then the nominal share price automatically changes to the new value.
ie: a one share for every two held consolidation changes the Nominal Share price to 50p.
I think we will receive an offer for the whole company very soon the financing puts in a better position to negotiate watch this space Good luck to All.
Maybe they want to consolidate first, so not having to change the '25p'nominal share setup?
If they sell half the company to someone they would have to issue the same no of shares currently on the register, doubling the current shares. I think its more the BODs snobbery that they do not want to be seen as a penny share that they then consolidate with a x to 1 arrangement to be valued somewhere between £1=£2. Mcap still £10.4M
At the end of the day, it will the market that decides the mcap/sp, but any rescue should see it multiples of the current £10.4M if we're still public.
Meldrew44,
The paragraph immediately following the one you quoted says this.
"In addition, the Company proposes to further undertake a sub-division as, under the Companies Act 2006, a company is prohibited from issuing new shares at a price less than the nominal value of its shares. Accordingly, in order to implement the Prospective Recapitalisation Plan, it will be necessary to reduce the nominal value of the Ordinary Shares to below the proposed Issue Price. Further details of the proposed consolidation and sub-division, which will be subject to shareholder approval, will be sent to shareholders in due course."
So their plan is to consolidate, or reduce the number of shares by increasing the Nominal Value to say 50p. This would halve the number of issued shares.
Then they plan to vastly increase the number of shares by a share subdivision to below the mythical ISSUE PRICE. Assuming this Issue Price was at 10p (as in my previous example), and they proposed issuing new shares at a new Nominal Price of 8p, they would have more then trebled the number of shares in issue from what they are today.
However, who in their right mind is going to purchase any new shares at 8p?
To sell these new shares they would need to be offered at 2p or less.
This would increase the number of shares in issue by over 10 times what we have now.
So, I fail to understand your comment "It seems clear to me that the BoD has in mind a significant reduction in the number of share in issue."
22p the 20% discount it will probably end up a little over 25p so they can keep the magic number. Even though with consolidation it means little other than maybe the pride of management by what others are saying about the past?
If share price is 2p and market cap is 10 million. They wanted to raise 110 million with consolidation. Would it not be 2x11 which is 22? Plus 20% discount but that would still not be 50p and maybe factored into the 110m. Just rough calculations rounded but am I missing something? They could do 50p but it would only mean reducing the number of shares more. I think… 🤔 baring in mind I have no idea and am not heavily invested here so don’t pay to much attention but I will be more if they can bring it back.
The RNS clearly states that " In order to implement the Prospective Recapitalisation Plan it will be necessary to first implement a capital reorganisation of the Company" The RNS then refers to a consolidation of share capital that will result in a more appropriate number of shares in issue. That clearly refers to a reverse split that will not only reduce the number of shares but will, in the process, also increase the share price of the remaining shares in proportion to the reduction of the number of shares.
The RNS then refers to a 'sub-division' and clearly states that it is also needed "in order to implement the Prospective Recapitalisation Plan."
The rest of the proposed plan depends on those two elements being in place and the share price being higher, and possibly appreciably higher, than it is at the moment.
It seems clear to me that the BoD has in mind a significant reduction in the number of share in issue. I experienced the 2016 reverse split so I wouldn't be surprised if this one was of a similar magnitude. The language in which they describe the necessity of a consolidation now is very similar to the language they used then. I feel It means that we might reasonably expect a new share price of around 50p with a corresponding drop in the number of shares we hold. That would invalidate any calculations some of us might be tempted to make, based on the present share price.
I thought I understood some of it but perhaps I didn't.
In any case, we can only wait and see what happens.
I am not sure of anything iWantThatOne, who can be with any RNS issued by this company?
I take new equity to include the issuing of new shares to existing shareholders. This can only be done at or above the Nominal Share Price (25p).
The term Issue Price does not appear later in the RNS. It only seems to apply to dealing with debt and outstanding payments. Neither is it at any time explained.
My GUESS is that suppliers and borrowers are being offered to settle the debt with new shares at a notional issue price of say 10p.
Eg: with the share price at 2p assuming AST owed you £100,000.
You would expect to receive payment of 100,000 x50 = 5M shares.
Eg: with a notional Issue Price of 10p assuming AST owed you £100,000.
You would only receive payment of 100,000 x10 = 1M shares.
All these payments would be made in 25p shares.
Assuming the supplier immediately sold his Issue Price shares for 2p (their trading value),
he would receive £20,000. An 80% haircut on the £100,000 owed by the company.
Are you sure about the CLN, Kenj? My interpretation of the RNS was that the debt swaps and new equity would all be at the same issue price. Let’s say 5p (I don’t know). So £61m+ equity at 5p would be 1.22bn+ new shares. And 6.4m of CLN would be swapped for equity at 5p less 20%, ie 4p, ie 160m new shares. I’ve ignored consolidation / subdivision here for clarity.
I think that I may have made some sense of all this. Or on the other hand, I may be completely wrong!
"Shares in lieu of fees
In addition, subject to obtaining the necessary shareholder approvals and reaching agreement with the various counterparties summarised below, the Company intends to satisfy amounts owed to various parties as follows through the issue of new Ordinary Shares at the Issue Price:"
Suppliers bills and adviser fees, plus some director remuneration is to be paid by the issue of new shares at the "Issue Price". But what is this? The issue price is not stated in this long winded RNS. It is also interesting that all this is discussed before they mention a subdivision of shares.
The suppliers and advisors are, I suspect, being offered payment in shares based on a yet to be negotiated price - the Issue Price. A similar, but more generous offer has been made to some lenders.
"As per the Company's announcement of 1 March 2023, various lenders who hold £6.4 million of secured convertible loan notes will have the option to convert their secured convertible loan notes into Ordinary Shares at a price that is equivalent to a 20% discount to the Issue Price."
They will be offered a poor price to settle this debt with the threat of insolvency hanging over negotiations. I'm guessing an Issue Price of somewhere between 10p - 20p. With the shares last valued only 2p, that is quite a haircut, but it is better than nothing.
I am sure that I am not the only one here confused by some of these terms, so I have looked them up, and posted the definitions below:
A SHARE CONSOLIDATION reduces the number of shares a company has in issue.
This is also referred to as a REVERSE SPLIT.
Eg: After a 1 for 10 consolidation, you would receive one new ordinary share for every ten existing ordinary shares held.
A SHARE SUBDIVISION is where shares are each subdivided into two or more new shares, thereby increasing the number of shares in issue. This is also referred to as a STOCK SPLIT.
Eg: After a 10 for 1 subdivision, you would receive ten new ordinary share for every one existing ordinary shares held.
Not sure that I follow your logic Meldrew44.
You said that "The rest of the proposed plan, including the subdivision, seems to me to depend on there being a higher share price than we currently have".
I would have thought that the subdivision is the very first thing that the company must do. They cannot issue any new shares until this is completed, as they admit in the RNS.
"In addition, the Company proposes to further undertake a sub-division as, under the Companies Act 2006, a company is prohibited from issuing new shares at a price less than the nominal value of its shares. Accordingly, in order to implement the Prospective Recapitalisation Plan, it will be necessary to reduce the nominal value of the Ordinary Shares to below the proposed Issue Price."