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...the Tender Offer RNS.
Can anyone please explain it in plain English rather than the RNS gobbledegook?
Thanks.
I'm not an expert, so take this with a pinch of salt, but as I understand it.... RSE will buy back about 36% of its shares at £10.50 each, by means of a tender offer. That means it will buy them directly from shareholders, not on the open market.
Since that price is well above the current market price, I imagine that nearly all shareholders will want to take up that offer, so it will likely be oversubscribed and shareholders won't get to sell as many shares as they would like. RSE hasn't said how an oversubscription will be handled, and I don't know what the normal practice is. Maybe each shareholder will get to sell about a third of their shares through the tender offer.
Once the tender is done I would expect the market price of shares to go down, a bit like going ex-dividend.
Since I don't want to hold RSE for the long term, I decided to sell my shares today, for about 920p, and take my profit that way. I don't know whether this will work out better than waiting for the tender. But I have my eye on other shares I can buy with the money.
Thank you TT, very helpful & makes sense to me. Like CYB I struggled to understand the RNS.
PekingDuck any chance you have the JPM commentary again & could share please?
Many thanks, tichtich.
Still questions remain on the mechanism here, but I guess that'll become clear in the near future.
Best wishes!
Exert from recent JPM note on results/tender offer:
RSE is proposing to return $200m (£158m) of its excess capital to shareholders via a tender offer at a fixed price of 1050pp,
a premium of 31% to the closing market price of 800pps on 7/2/24, and a 16% discount
to the 31/12/23 NAV announced today of 1253pps (see below). RSE expects to launch
the tender before the end of this month, closing during March. The number of shares
purchased is expected to represent ~36% of RSE’s existing ordinary shares then in issue
(excluding any shares held in treasury). The tender requires shareholder approval at an
EGM, which is anticipated will be held in March, and will be subject to other legal,
regulatory and customary conditions. Since the announcement on 23/5/23 of the
authorised increase of £30m for the share buyback programme through to
31/12/23,126,023 ordinary shares have been bought back at a total cost of £18m ($22m)
at an average share price of 567p/$7.13. As of 31/12/23, £22m was available for
repurchase. In addition, pursuant to changes to the IMA announced on 3 January 2020,
the manager agreed for RSE to be required to repurchase shares or pay dividends equal
to 20% of net gains on dispositions. No further carried interest will be payable until the
$85m of realised and unrealised losses to date at 31/12/23 are made whole with future
gains.
Portfolio performance for the last quarter of 2023 remained essentially flat with positive
performance from the conventional energy portfolio offset by lagging results from the
decarbonisation investments. Growth stage (pre-profitability) energy transition and
decarbonisation investments continue to lag broader markets, and still face adversity as
the viability of their business plans remain in question due to a dampening of investor
appetite in the face of higher interest rates. RSE points out that a lower risk appetite
presents a substantial risk for these businesses as they are at a stage in their growth that
relies disproportionately on funding from private equity, corporate balance sheets and
institutional investors, and that RSE’s decarbonisation investments are not immune from
these headwinds. On the energy commodity front, WTI crude prices were down 6.5% in
2023 and 20.8% in 4Q, with Brent Crude down 6.2% in 2023 and 19.2% in 4Q. Henry
Hub natural gas spot prices were down 29.1% in 2023 and 3.7% in 4Q. Consolidation in
the US oil and gas sector has reached levels not seen in a long time with over $250bn in
acquisitions announced in 2023. The Permian basin featured prominently in this deal
activity and reflects the acquirers' strong balance sheets due to the sector's commitment
to cash-flow-generation.
Against this backdrop, RSE's conventional energy portfolio gained 7.6% in value over
4Q, driven largely by Crescent Point Energy's (previously Hammerhead Energy) 21.1 %
improvement in share price, countering slight weakness in Permian
December, Crescent Point Energy finalised its acquisition of
Hammerhead, which resulted in a $175m distribution to REL and the receipt of 8m shares
of Crescent Point Energy (CPG). In addition, Onyx's valuation also increased from 3.00x
to 3.20x Gross MOIC. However, the decarbonisation portfolio dropped 22.9% in value,
driven primarily by its position in Enviva, which lost 85.4% of its market value due to
missed earnings targets, plant-level operational disruption, and ongoing restructuring. In
addition, FreeWire lost 75% of its value due to reduced growth projections as the
company works to preserve cash in a challenging fundraising and growth environment
for EV-related businesses. With the exception of Infinitum, the remainder of the
decarbonisation portfolio continued to suffer from fundraising headwinds caused by the
impact of rates and lower risk appetite from investors. RSE says that these businesses will
remain susceptible to market volatility until they reach profitability.
Having updated our model, our live NAVe falls by 1.2% from $15.76ps/1248pps to
$15.57ps/1233pps, down 2.5% since 31/12/23, reflecting overall weakness in the listed
holdings, with a notable 57% fall in Tritium, 48% in Enviva and 10% in Crescent Point.
RSE continues to show its commitment to capital returns, with its announcement today
to return $200m via a tender at a 16% discount to the 31/12/23 NAV. The tender price is
fixed at 1050pps, a 31% premium to last night’s close and a 16.4% premium to the current
price. If approved by shareholders, this would lead to an estimated uplift of around 8.7%
to our live NAV. The potential impact of the remaining buyback capacity would be to add
around 1.7% to NAV in the absence of the tender. But it becomes more powerful if
deployed post tender as the £22m would buy back a larger proportion of the remaining
shares at potentially a bigger discount to NAV (we argue that post returns of capital the
headline discount should widen to reflect the smaller amount of cash on the balance sheet,
with the price constant, and the NAV enhanced). At current prices the combined impact
would ab an estimated overall 12% NAV per share increase. The price has responded well
to the tender news, and is up 13.5% to 908pps (@9.30). This implies a headline discount
of 26.3% to our live NAVe. But stripping out cash and listed this is a 106% discount to
the remaining unlisted holdings (this is the metric to focus on in our view, and should
remain constant before and after any capital returns). This remains very good value in our
view and thus overall we remain Overweight
Many thanks PekingDuck! Much appreciated!
I tendered all my holding for the buyback at £10.50, got scaled back to 54% which is better than the initial offer of around 36%. Pretty happy to get out with > half my holding at this price, having bought in under £5. Letting the others revalue towards £10 and then run this to see if the green energy recovery boosts the unlisted holdings over the next couple of years..