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Apart from the obvious asset give away at 1/3 of EV!! what does it mean to PI’s contemplating selling now?
Assume you have 1000 shares…
T/O price 263.6p
You get 1000 x (£2.636-4p) = £2596 per 1000 shares.
By waiting you collect the divi = 4.0128 x 1000 shares = £40.128
So £2596 + £40.128 = £2636.128
Those selling now going by the last trades today on LSE get 256.5p.
So 1000 x £2.565 = £2565 (less your costs, I will leave out)
That’s a difference of £71.128 per 1000 shares..
For an average PI, I have no idea what that is, but say a few that invested may have up to 5000 shares, some may have 100000 but I bet most have a couple of thousand shares as they spread their risk elsewhere.
So the point is….
5000 shares = 5 x £71.128 = £355.64
100000 shares = 100 x £71.128 = £7112.8
Now factor in Reservoir Capital that have undertakings for 71.36% of the issued shares then you do the math!
So the price is well positioned so that it’s hardly worth holding the shares for the average PI but it is for much bigger holders.
That is why you are seeing buys coming through for say 200k shares because it’s worth taking money off LIBOR and putting it on risk here for those that can but for the smaller shareholders they are selling relatively cheap and Bidco are mopping up the shares and the votes!
For a large buyer it’s pretty much free money if it goes through as the vote is a forgone conclusion due to Reservoir’s huge holding and delay risk is underpinned by the next two close together divi’s and the obvious asset discount.
If you think this bid is undervalued as I do then others will to. Simple as. It’s just a question of time now. Hopefully potential bidders will be doing the numbers.
The oil majors are awash with cash and have been selling HC assets to develop renewables. GLO has an amazing pf of assets and it would be relatively easy to offload any you didn’t want as they run pretty much independently.
However, a ‘small PI holding’ would have to factor in the additional time and unknowns for say an extra 25p premium a share IF a counter bid came in. Again that may not be worth the risk but it may be for a larger holder.
For them the risk is also ‘as long as the deal completes’. However, favour is that the majority shareholders already have 75% of vote and there is unlikely to be any competition or regulatory conflict as it’s small scale assets.
So holders will get at least 259.6p a share + the divi if buying now and holding to the end or a 6.6p payment per share for waiting.
That’s £66 per 1000 shares! Or £3300 on 50k shares! (2.568% for 6 months). Not to be snubbed at!
I wouldn’t be surprised to see the price to move up as institutional investors work it through as the can also hedge the downside.
I intend to hold the ones I have now. I may sell some if I need the cash but am not selling out otherwise.
Usual caveats
Trek
Interesting that you suggest GLO.L's biz has suddenly become trendy. And here was me holding it since ever just because it was a nice little divvy earner! Difficult play. We'll see how things go today.
BTW Is default, just do nothing and 263 pennies will show up in your account sometime?
Good summary Trek. I had personally bought 17500 shares and sold the lot for 2.586. It was not any easy decision but overall I have cost myself £1000 in doing this now. That was considered when I sold the lot yesterday. I have slung some into DEC, some into VSL and some into GKP but have half left in which I am yet to find a home. I am a dividend investor and have actually improved my PF yield with yesterdays purchases. I just felt from where I was it was more beneficial to do it now that in 3 - 4 months time.
Maybe if i was holding more I may have looked at it differently and held on but I have been sitting on Petroteq shares for nearly a year whilst I wait for an hostile bid to transpire. I couldnt handle 2 of my stocks in the same position although this GLO looks very likely to complete. I dont think its as easy as someone making a greater offer when the current Bidco already own the majority share.