Member Info for happysparrow

This is where I first heard of 'naked shorting' - my knowledge is limited to this:
https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=31&ved=2ahUKEwiA3K7vkrbhAhVCt3EKHXCeBUs4HhAWMAB6BAgGEAE&url=https%3A%2F%2Fwww.valuethemarkets.com%2F2018%2F07%2F31%2Faim-chief-exec-lofgran-breaks-ranks-challenge-market-makers-naked-shorts-ntog%2F&usg=AOvVaw2Hb5EugbEJd-E3ZtLcDwEW

correction - (otherwise it will have to sell those borrowed shares back into the market?).

This should read - otherwise it will have to buy back those borrowed shares in the market.

apologies

continued...

... Why haven't we completed the purchase of the Bacton Thames-facility?'

So, perhaps this placing, and the BoD need full investigation by the administrator? I don't suspect that the administrator could have been be aware of such alleged activities (if there is any truth found to this speculation), and if he had been aware, I'm sure he would not be complicit in being party to such alleged activities; instead, if he had been aware, I'm sure he would have insisted that our BoD engaged with, and accepted RockRose's potential offer ( no matter that it is a derisory 20p). It is time for the administrator to investigate - and to assert his authority. Not just for the LCF debtholders, but now too, for IOG shareholders.

However, do not panic on reading this. My speculation may be entirely unfounded. But let's ask the questions. It will get sorted out, I'm sure. The assets are still worth £782 million presumably. Nothing has changed on this. Shareholders should be rewarded somehow. Hopefully with RockRose's offer, and then a counter-offer from Ineos.

I woke up thinking this - that's before I even saw today's accounts!

What I have to say is entirely speculative, and there may be no truth to this, but to me these thought are of concern.

I think these issues need to be investigated by the administrator (who may have been misled?). And if they don't like the answers, they should insist the BOD engage with RockRose Energy and accept their potential offer of 20p immediately.
From Rockrose RNS: 'Under Note 2 on Rule 2.8 of the Code, RockRose (and any person acting in concert with RockRose) reserves the right to set aside the restrictions in Rule 2.8 in the following circumstances: (i) with the agreement of the board of IOG; ...'

It looks to me like we have been the victim of 'Naked Shorting'. It is illegal in the USA. My very limited understanding of this is that an institution sells borrowed shares in the market that are shares that don't officially exist i.e. they are in addition to a company's total number of shares issued (Note: I don't understand this fully, or how it is arranged). Selling the shares drives the share price lower. The institution then balances its books by buying the shares back at a lower price in a forthcoming placing.

The institution gambles there will be such a placing (otherwise it will have to sell those borrowed shares back into the market?). First they need to know the company needs money (It's been made clear we do. Too the LCF scandal first arose back in Oct 2018. Too, they might have suspected all was not right with our accounts, and explanations from the BoD). The institution may even employ bashers to help drive the share price lower, as well as constantly selling borrowed shares to drive the price lower. With such a low share price, the company finds it is not in a good position to raise funding from other sources. Then, out of the blue, they get a phone call from the institution offering to lend them lots of money in a placing - only problem is that they want the shares ridiculously cheap. The company, unable to get money from other sources, willing accepts the ridiculous terms. The existing shareholders get screwed. And, as I said yesterday, the institution is laughing all the way to the bank.

Our average share price throughout March was about 18p. At worst, the placing price should have been no lower than 15p. Accepting money at the year low of 10p is ridiculous. The placing needs to be rejected and the BoD told to arrange the money through other means (farm-out, preferably).

One reason our BoD might be desperate to accept the rotten 10p offer is, I suspect, that they have not been straight with us - and we are close to insolvency. It looks possible that they have been using the LOG loans to stay afloat? - and this could have been going on for a long time? Why are we using the placing monies for the Harvey drill when, back in September? LOG loan money was set aside for this very purpose, I understand?

Continued...

Hi, PP.
The point is that you can only buy back 3/19ths of your shares at 10p. The other 16/19ths may well cost more.

Another way of putting your question is why are people paying 12.5p today if they can can pay 10p in 3 weeks time (they probably can't).

These are some scenarios:

- the placing is not approved by the shareholders and the management are instructed to raise the money through the FID or farm-out, or by loan, instead. (Without dilution the share price might be in the range of 15p+ until farm-out?)

- there is an expectation that a rival bid may come in over the next 3 weeks (my hope). 20 to 30p?

- the institution taking the £16m placing expect the share price to rise above 10p

- the administrator knows we will get a better return than 20p using this strategy over a presumably reasonable timeframe.

- the assets of £782 million, once funded, could then attract a bidder at a higher value than 10p (presumably a lot higher)

- the assets at first gas in 20 months from FID will bring us a share price higher than 10p.

In other words, everything suggests that the current share price is a real bargain, even if diluted to 10p. But there is risk (much more so than a certain bid offer for 20p) - and I have strong reservations over how dilution (and I regard as probably unnecessary dilution - until I have answers) will kill off the share price increases that we once hoped for.

So it is attracting new investors for what looks like a real bargain at this price; but, if the placing goes ahead, it will no longer be the risk/reward trade-off I first invested for (my view is it is now higher risk / lower reward).

Hope these thoughts help.

Malcy '... what I can’t understand is what on earth the administrator thinks it is doing taking shares worth 10p against an offer of more than twice that much, responsible, I’m not so sure but then it turned down £52m in hard cash…'

Responsible? - I'm not so sure.

Isn't the administrator leaving himself open to being sued for negligence here? They must be pretty sure of their ground? Given the placing, my basic calculations do not support their position (of rejecting the offer without engaging further with it) that it is in the best interests of their debtholders (and us shareholders) - so they either know something different, or (if allowed, and possible) they have been offered a re-payment deal that favours the debtholders over the existing shareholders (and that our interests are not aligned) - who have just been thrown to the dogs. Meanwhile, the new placees are laughing all the way to the bank - so I want to know all about them too.

Aligator - I'm of the same mind.
20p might have been derisory, but it was certain money; whereas 10p is a real kick in the teeth from people who are meant to be on our side.
Not impressed - and await answers.

F_T - check out Jim ratcliffe - not short of a bob or two.
ATB

malcy also references Ineos - as the farminee?
Instead, my hope is that Ineos will actually make a bid for IOG before 23rd April, whilst we are at our most vulnerable. Too, that would allow RRE to come in with a counter-offer.

malcy asks the main question - what does the administrator know that made it decide to take a 10p placing rather than a 20p offer + £52m cash for the debt..

'Independent Oil & Gas
I intend to write something a bit more detailed about the whole RockRose/IOG saga before long, in the meantime comment on today’s raisette. I am meeting with both companies in short order.

IOG has announced this morning the details of the Open Offer to shareholders with plans to raise £2m at 10p on a 3 for 19 basis. This portion of the recent raises is for ‘working capital and management expenses’ whereas the other raise was for the Harvey appraisal well 2H of this year and sundry gas field costs which I’m sure that ordinary shareholders will be pleased about. I have always been a big fan of these assets but also been concerned about the funding, this goes nowhere close to solving those long term problems, let’s hope they have Jim Ratcliffe on speed dial…

The money I assume that is being raised on this occasion will keep the company going until the farm-out process is finished and/or the raise of some £250m+ needed for the development of its gas assets has been completed. In addition the company confirms that they are issuing 20.5m shares to LOG as part of a debt for equity swap, what I can’t understand is what on earth the administrator thinks it is doing taking shares worth 10p against an offer of more than twice that much, responsible, I’m not so sure but then it turned down £52m in hard cash…'

Flabby - unable to get a buy quote for more than £100 currently. So expect some upside from these levels shortly?

Is that the rival bid coming in?

Workover - that's why rival bids need to come in before 23rd April.

Good post, trellis. And good idea. Too, it seems best I email my questions to IOG I want answered before agreeing to the placing.
Thanks.

Sadly, I think she'll get it easily because, as said before, I think this strategy must have been agreed with the major shareholders already.
Personally, I will vote against unless I get some very good answers in the document they are sending us soon.
I have some hard questions to ask, not least, why was it necessary for us to fund the Harvey appraisal well - wasn't that to be included in the farm-out? Where has the money from the LOG drawdown facility gone?

https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=2ahUKEwjh1v3k77DhAhXqQxUIHbf_CekQFjAAegQIBRAC&url=http%3A%2F%2Fwww.thetakeoverpanel.org.uk%2Fdownload-links%2Fthe-takeover-code&usg=AOvVaw0KPYQU8nxDUezYnGtYZG96

Refer to pages D 15-17 (and F22).

From RRE RNS:
As regards the Possible IOG Share Offer, Rockrose is consequently, except with the consent of the Panel on Takeovers and Mergers (the "Panel"), bound by the restrictions set out in Rule 2.8 of the City Code on Takeovers and Mergers (the "Code"). Under Note 2 on Rule 2.8 of the Code, RockRose (and any person acting in concert with RockRose) reserves the right to set aside the restrictions in Rule 2.8 in the following circumstances: (i) with the agreement of the board of IOG; (ii) if a third party announces a ?rm intention to make an o?er for IOG; (iii) if IOG announces a "whitewash" proposal (see Note 1 of the Notes on Dispensations from Rule 9) or a reverse takeover (as de?ned in the Code); or (iv) if the Panel determines that there has been a material change of circumstances.

My question is why are RRE emphasising this?
It does not seem to me they have given up hope of acquiring us, and in the next month. (They cannot bid for us now for 6 months, unless with the exceptions stated in note 2).

One scenario is that shareholders will not accept this placing, and mutiny - and thus that the board will agree to the RRE offer, or at least, to engage with RRE after shareholder pressure. [But I should imagine IOG agreed this placing with the major shareholders and the Administrator prior to the announcement - and they accept it is the best way forward for the long-term shareprice and repayment of LOG loans].

A second scenario is that a rival bidder now makes an offer, allowing RRE to then compete with a counter-offer.
It would seem sensible for anyone wanting to buy the company to buy it now, before the 23rd April meeting to accept the placing (and dilution), when IOG is at it's most vulnerable - once we have the funding to appraise Harvey, with a farm-out soon, LOG loans re-scheduled, and FID organised, we will be too expensive for many.

This second scenario is what I hope for (with a lot of wishful thinking).

Trouble is, 600T, I doubt we will now get to the 23rd April.

If RRE come in with a formal offer above 20p (and why not, it was a bargain at that price and is no less of a bargain now. I don't expect they ever expected to succeed with such a lowball offer - but IOG have left themselves open to it) then a lot of shareholders now may well be willing to jump ship.

If the offer comes in at 5pm tomorrow (I'd expect them to be buying shares in the market until then) then at least IOG will have to make a proper defence - from which we will learn a lot more.
Too, a rival bidder will also have to show his hand soon after.
The plot thickens.

I'm not good at maths, but my sums are:
RRE was willing to pay £25.5m for IOG assets. (127.5m share @20p).
Those taking part in the proposed placing value the company at least at £33.6m (336m shares @10p).
An offer by RRE at 26.4p would value the company at £33.7m also.

However, existing shareholders unsettled by today's announcement, may well take a lower value for the company now rather than wait for farm-out or Harvey appraisal.

A formal offer of 22p should do it imo.

It is time for RRE to strike (or any other interested party - Ineos?)

LTHs are waiting for RRE's next move, or news of farm-out. I doubt many will fold at this price today - yes, a bad day for loyal shareholders, but the picture may rapidly improve. Very much a matter of faith. We know the value of the assets - and a big bonus if Harvey appraisal well comes good (63% COS). Great opportunity to buy in cheap - but I will not be adding more until the position is clearer.

This could be the time for RRE to come in with a realistic low (but not unreasonable) formal offer?