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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
There yer go curly 75 ,another poster following in the path of sanity recommending you be ignored.Very soon, you are going to rant miserable forecasts to yourself.
Ohhhh that's goner hurt
Sundance
KTF/Antigua - the old he’s mad as a box of frogs approach! Classic. Which part of my interpretation of the RNS was factually incorrect, exactly? None of it. 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) and the impact of this 12%_??% dilution coming from this latest interest rate related share conversion by the latest lender to take SOU’s eyes out. GL and co must be seen as a joke and cash cow amongst these lending sharks. Free cash at SH expense. And all the while a lot of hot air and zero, or less than zero given the cash burn rate, actual tangible progress. Rather than your lame attempts to discredit individuals here, why don’t you take apart what they post about SOU, it would be far more effective. Oh yeah, you can’t…. I’ve been right in SOU since I started posting, it’s 55% lower despite recent brief rally. You’ve seemingly been wrong, very wrong, for many years. Bit of humility!!??
Eric,
the timing is not down to Sound. they can only announce when they receive the conversion notice.
also, the conversion is absolutely not a surprise. I for one expect the whole convertible to be converted as and when the terms allow. also note this was the last date they could convert in this tax year.
as for kylie's ravimgs, he has clearly lost the plot as he had in previouw guises. best ignored.
Hi we must be getting close to good news coming from sound energy the desperate rantings from kyle is of a person who has done his brains in and sold at loss and cannot bear to see sou shareholders benefit.⁸
Well that is a. It of a bummer.
After hours, before a 4 day break is about as cynical as you can get. JP did something similar on his way out.
At least this is not one of those death spiral loans. But it would be really useful if the Calvalley deal was done and dusted so we can close this loan off….
Mr Not2
Not too sure its a basket case Mr2 as it may just surprise the many and your input of " not helping anyone " quote is incorrect as you see he is helping someone and that someone is him/her self . As I have stated before stating his/her opinion on a BB to the faceless is what social media trolls are , Kylie is a troll simple as that .I very much doubt that he/she would have the confidence to say the same face to face as he simply doesn't have the sand to do that ,he/she would rather type away the demise of Sound with fervour and malice from the safety of his/her bedroom or office knowing full well that it would cause returns of disagreement at least and sadness and dispair at worse. He/she doesn't give a flying tinkers toss what is thought of him/her .I have him on ignore as I know exactly what he is saying he/she is that boring and gray .I would find the poetry and writing on the wall of a men's public convenience ( no idea of what a womans reads like ) more interesting than the same tune and noise that the miserable git is writing
come on kylie throw us a bone ..why sound ?..there must be plenty of bull**** ceos on the market you could pick on ..one could understand if you were invested and lost a sh*t load but no ..why waste your time because you are not helping anyone as they are so under water there is no point in selling ..most know it is a basket case but you cannot seem to let go
can’t anyone see gl is simply using similar techniques to jp? jp talked the talk but ultimately was woefully inadequate at walking the walk. same with gl. it’s like a confidence trick, all non rnsd rah rah positivity, lame photos of minor progress on an lng tank (one aspect of a huge to do list re phase 1 still) that should have been producing by now and *******s and bluster. yet the cold reality is this project, its complexity and cost and delays and incompetent and evasive and distrustful management are going to break at least existing shs imho, possibly the company. there’s no news near in my view, a summer whinging video to explain further delays and lack of delivery after a near certain 30% dilution fund raise is coming (on top of the 12% interest related dilution all shs were rudely reminded of yesterday ahead of a long weekend!). sp will be at 0.4p by may imho. gl is a chancer, a bs artist. it’s all talk and no action no delivery no cash, same as ever with this company. a big bottomless hole in the desert full of sh cash.
This is similar to interest only deal on the Beverly Hills.
Only this is in A Bigger Location in Morocco.
Pipeline Future for SOUND - BUY BUY BUY
Frustrating on this bb. Many are truly clueless. This doesn’t bring a penny into sounds coffers. It merely repays what is an existing debt / interest. So no, it doesn’t keep the lights on at all. The new broker will no doubt lead a raise soon, sp below 0.4p by mid April is my view. Cheap for those still buying the 6-7 year dip in their new year ISAs!! Oh dear.
No, to keep the lights on
Sound Energy PLC - Partial Conversion of Convertible Loan Note & TVR.
We’ve all got a loan or a mortgage this looks like we are going for a move on to Bigger House.
House is SOUND.- BUY BUY BUY.
Even the most die hard ‘head in the sanders’ can’t fail to see how utterly moronic GLs last (and likely next) fund raise was. Read the latest RNS. A wave of interest conversions to come (totalling 210m shares at todays sp) that at the current sp account for 11-12% mcap, when the sp is back at 0.6p next Friday after 30m sales next week, it would represent 17% mcap dilution coming down the tracks soon. Dilution is what will kill SHs here, delays and dilution go hand in hand. All a result of zero delivery by management. All talk no delivery. Gonna be a fun short week next week…..eek…