RE: 2.019 mm share count (on a fully diluted basis)13 Jun 2022 14:10
Hi PS:
The impact of the additional shares in the target price depends on what the dilution is for.
For example, if the company buys a new asset through the issue of new shares, both the company´s total asset value and share counts go higher. In that case, the effect on the target price will depend on the relation between those metrics (value of the additional asset vs additional shares issued to buy it).
In the case of SOU, the dilution that has happened in the last few months generates only a few million of additional cash, that will be eventually applied to keep the lights on, or pay day to day expenses.
Lets see:
1. Warrants outstanding (2.021 Annual report page 93), for the equivalent of 100 mm shares.
These warrants have a strike price of £ 2,75 p. If they are converted into shares, they will add £ 2,75 mm to SOU´s cash position.
2. Stock options issued on May 3, 2022 (see press release on that date), for the equivalent of 69 mm shares
- 20 million options are nil-cost to the beneficiary
- 49 million options are excersible at a price of 2,4 p/sh. They will add £ 1.1 mm to SOU´s cash position
3. Shares issued in most recent equity raising (see June 8, 2022 news release): 200 mm
The amount received by issuing these shares (£ 4 mm) will be used to fund general expenses, for the most part.
In conclusion, the recent increases in the (fully diluted) share count will add a minimal amount to SOU´s total assets value. I expect future share issues to be very similar to the last ones.
Then, answering your question, I think the target price informed by the analysist should be proportionally reduced, to give proper consideration to the higher share count.
Regards
Fernan
Sign In
Follow the stocks
