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But they’re not shorting as they “bought” the shares under the Subscription Agreement, but if you read the RNS, AST then returned the £1,080,750 back to Riverfort under the Equity Sharing Agreement. The amount AST gets depends on the SP performance, but we’ve effectively allowed Riverfort to dilute us for below the 0.27p “premium”. It’s bonkers and a win win for Riverfort.
HawaiifiveO, but the sad truth is the lower the SP goes below the 0.27 benchmark, the less Riverfort have to pay for the shares. They are actually perversely incentivised to see the SP drop, pretty much the same way a shorter is.
Also, Riverfort have not paid 0.275 for the shares. The amount they pay is spread out over 12 months and depends on the average SP for the month. If it’s below 0.275 then they are actually paying less. So it’s a win-win for Riverfort.
HawaiifiveO, I was trying to get my head around the Riverfort equity sharing arrangement last night. I have to admit I was initially bamboozled by it - not really seen anything like it before - but a bit of research showed that Riverfort have entered into similar equity sharing arrangements with other small O&G companies.
AST issued Riverfort with 393m new shares in return for £1,080,750, but under the equity sharing agreement, AST have to return the same money back to Riverfort. So basically Riverfort have paid nothing for those shares. It's selling those shares into the market and PI's are buying those shares from Riverfort. The amount Riverfort actually pays AST depends on the average monthly SP - so actually it's not in Riverfort's interests for the SP to go up is it because if the average monthly SP is above the benchmark Price (0.275p) then they have to pay AST more? They obviously don't think AST is going to succeed otherwise why would they have agreed to this equity sharing arrangement?
I also admit I'm concerned by the £420,000 loan from Riverfort which has a ridiculously high interest rate of 10%. We've not seen any production figures for a while not had any news on field development - just how is the company planning on paying this back?
Does anyone have any views on whether this equity sharing arrangement, in particular, is good for the company. Obviously the SP depends on news flow, but assuming the company delivers the goods, are we able to benefit from it? It doesn't seem that Riverfort believes the company is going to succeed and hasn't helped AST with the punitive interest rate on the loan either. Let's not also forget the 43,000,000 warrants Riverfort have - but these still have to be approved by shareholders.