Member Info for Hexam

Yes, it's good that this funding is non-dilutive and at a reasonable(ish) interest rate. The concern for me though is that this is for electrical infrastructure which I thought was already paid for from the IPO where $80m was said to be sufficient for both phase 1 and phase 2 of Texas (i.e. the first 200mw). Now a further $26m is required?

This may though be for the transformers for the next 600mw, but it would have been good if it had been explicit on that. Even so it still leaves open the much bigger question of how the machines for Texas are going to be funded.

AB - I agree, the bigger the pool the lower the variance but my question remains. Would for example having 50% of the global hashrate mean that a miner would expect to mine 50% of all BTC mined? I suspect this the case but what's bugging me is the question raised before and that was never properly answered i.e. if it is true then why should any reasonable sized miner bother being in a pool or care whether others join it?

If I could butt in here (and since my name was mentioned yesterday in this debate I don't feel too bad about it) I don't know which of the two of you is correct. It depends whether the 'now' position stated by AB is accurate.

If it is i.e. that today the expected percentage of BTC mined is exactly proportional to how much % of global hashrate a miner has then this will always be true and AB is correct. In other words if it is true now then it will always be true (and must always have been true). Anything else just breaks the laws or maths and probability. Of course as there is randomness in mining then the actual numbers mined won't follow exactly this pattern but the expected numbers will (and of course there are 'events' that will affect numbers too like shutting down power etc.)

HOWEVER - all the above assumes that expected BTC mined is proportional to % of global hashrate. If this isn't then it won't be true now, never was true and won't be in the future. If this is the case then FP is correct as bigger miners have more advantage and this will grow more as their size grows even if the percentage of hash rate they have stays the same.

So the real question is:

Is this statement true:

"Now:
Total network hash is 100EH.
BigMiner 1 has 10EH, and mines 10% of BTC.
BigMiner 2 has 5EH, and mines 5% of BTC".
MediumMiner has 1EH, and mines 1% of BTC.

Obviously I mean are the %'s true as clearly the global hash rate is higher than 100EH now. I don't know the answer but would be interested in any actual proof one way or the other.

If difficulty increases at the ‘usual’ rate then would expect a 40-50% increase in 6 months time. So personally I think they’ll do well to get to 300 btc a month. A figure of 400 btc appears to me unachievable unless they have some big surprises up their sleeves - I.e. more than just the 2EH, overclocking and moving a few machines.

“According to LSE rules, if there was a takeover bid this would need to be for at least the highest SP over the past 12 months. That’s currently 173 until September, then in the 140s.”

I don’t think this is true. I believe it only applies to the price that any potential buyer has bought any shares previously for over the last 12 months. Could be wrong though?

Jimmy/Algo - I agree it's not as simple in this case which is why I said it only gives the answer before sentiment AND the consequences of dealing with payouts etc.. All I was trying to do was dispel the persistent myth on here that a 95% 'dilution' by number of shares automatically means a further 95% reduction in value. It simply doesn't work like that -unless of course the new shares are all given away for free and not to existing shareholders.

As you say, nobody really knows what the impact will be but what it won't be is an automatic 95% reduction in value.

"It assumes the SP reflects the portion of the value of the company."

Exactly - which is why what you are saying is not true. One simple example demonstrates:

Suppose you own £1000 of shares (over 30k shares at around 3p each). Rather than doing an RI the company places shares that are 19x the current mcap (so about £285m)).

Your share in the company is now 5% what it was but the mcap is now £300m as the mcap immediately after an RI or placing always equals the mcap before plus the amount actually raised. This is a simple truth that can be checked in any text on equity raises but is of course before sentiment kicks in or any subsequent events that may effect sp take place of which there are many likely here!

So instead of owning a share of a company worth £15m you now own 5% of that share but of a company worth £300m. In other words the sp remains at 3p and you still own £1000.

Of course the terms won't be as above but the same principles apply and if it is a rights issue rather than a placing this rule always applies, assuming the offer price is not greater than the sp and you also have the option to sell the rights:

The value of your shareholding (NOT the sp) after the RI but BEFORE SENTIMENT kicks in will be the value of your shareholding before the RI plus any money you have invested to take up the rights or less any money you have taken out by selling the rights. This is just the maths though and whilst true (again easy to check online) sentiment does have a big part to play and usually with RIs the value does fall - but it won't be by 95%. The situation here is obviously made much more complicated as well by all the creditors/claimants that need to be paid etc and so have to consider what impact this might have as well (just like any investor who will be asked to put in the new money will need to).

This is key stuff for anybody voting on any offer or deciding what to do with their investment. It is important for everybody to understand what the implications are financially for them of whatever offer is put forward before making a decision. But please do not just believe me or anybody else on this forum - find out yourself how it all works and what it means for you or find someone you trust to talk you through it.

"Also this smaller slice of a bigger pie is outright misdirection"

No - it is just trying to explain the maths. Yes, the company is a mess, there is no dressing it up. Yes, the sp has collapsed and getting back lost value is very difficult and depending where you originally bought in could be all but impossible.

BUT the 19/1 offer does NOT mean you lose a further 95% on top of what you have already lost. THAT is what is purposely misleading or just ignorance.

Yes, the travel sector is being hit by oil prices which adds to its woes but I think the reason CINE is falling so sharply is simply that when the market goes risk averse then 'riskier' shares (including all 'recovery' stocks - and in addition CINE still has the court case hanging over it) not surprisingly get hit harder. They bounce back quicker too though if the market becomes less risk averse again.

The maths IS wrong though. Yes, anybody who invested £1000 at 30p will have seen their investment fall from £1000 to £100 as the sp fell to 3p.

But whatever the terms of any RI or placing the value of that £100 will NOT then fall to £5. With a 19/1 offer you may indeed end up with just 5% of the company (assuming you don't take up any RI) but it will be a much smaller slice of a much bigger pie.

The value is likely to be much closer to £100 than £5, where exactly depends on the terms of the offer and the sentiment that goes with it.

Alex - I can't think of any upside, just think it is not that much of a downside. There may be some short-term pain as institutions adjust their funds but can't see much longer term negative. Besides only a modest rise in sp is needed from here and the mcap will soon be high enough for CINE to qualify again for the index - perhaps as soon as the next quarterly review - and I think most of us holding here are hoping for much more than a modest rise from 35p!

I'm not sure if the news that CINE will drop out of the FTSE 250 on March 21st would have had much impact on the sp now, partly as this is not exactly news (it was widely reported earlier as being expected) and it doesn't actually happen until later this month.

When it does then some institutions will have no choice but to sell if their holding is part of a mid-cap tracker which has to hold the same share mix as the index - so if CINE aren't in it then such funds will no longer hold any shares. The same may be true for active mid-cap funds but they only use the Ftse 250 as a benchmark not as a rule. So whilst it may indeed have influenced some institutions already there is a bit more pain to come from this unfortunately as the trackers shift their funds when the index actually changes.

Key thing though is that the relegation from the index is not a comment in itself on CINE, it just reflects the sp which at the current level simply means the mcap is no longer in the top 350.

Sounds about right FP. Only reason it might be higher (other than just the usual element of randomness) is if there was a reason for January being so much lower than expected that isn't there now.

All miners though will be impacted because of the short month and only those who have added machines in February are likely to be able to offset both this and the increase seen in difficulty.

"I certainly knew I could end up with nothing but some shareholders are no better informed than some borrowers"

That's a fair comment and only have to look at the scary number of people who just don't understand Rights Issues to have evidence of that. The difference though is that many people taking out loans like this need to whereas as nobody needs to buy a share. One can be a necessity the other is just a form of gambling where some you win and some you lose.

I agree that perhaps there should be controls in place, as there are in other forms of gambling, I'm just not sure what these should be. Of course many also take loans out from wanting something, rather than a need, and some current claimants would have been fully aware of what they were getting into and so are just chancing their arm now. I don't have much, if any, sympathy for these but those who took out loans as they had little other option are very different I feel to shareholders.

Gotta smile on this board sometimes.

Once again though it is for a 'tiny' amount. Just $10m. Barely enough to pay for a couple of Texas promos ;-)

Seriously though, I don't think ARB can make a sizable dent in the funding needed to pay for the 2EH already ordered, let alone the rest of the 200mw (or 800mw), from just loans. They just don't have enough BTC (that isn't already tied up) or other assets to use as collateral. They do have plenty of other options though other than dilution but difficult to see them avoiding this completely.

"if ARB announced a £200m RI or placing, would the resultant company not be worth much more than £0.5b"

Yes - it would be worth £0.7bn assuming you are defining worth in terms of mcap and £200m is indeed raised. That's just the maths though - sentiment will then take over (as we saw with the IPO) and that could easily go either way. Personally I'm less worried about how they raise it and more concerned with how quickly they get on with it as staying at 1.6EH much longer is the worst case scenario for me. Growth is key and they need some kind of funding to achieve it so hopefully we won't have to wait much longer.

“Monthly update due next week for March, Tick up?“

Only if there is some unexpected good news that comes with it as the updates don’t usually lift the sp. Besides the numbers won’t look great this month as difficulty is up another 8% and of course there’s three fewer days mining in February. 150?

Hopefully though the good news (and numbers) start rolling after that as Texas begins to get online. Plus annual results due.

It feels a bit pantomime but oh no it's not. There are 475m shares currently. If they want to raise £300m from shareholders then that works out as 63p for each share you currently own irrespective of the ratio as it's just 300 / 475. If it is 1 for 1 then you will be asked for 63p for each new share, if 2 for 1 then you'll be asked for 31.5p for each new share (but for twice as many) and if it is 19 for 1 you'll be asked for 3.3p for each new share (but for 19x as many). Only the total amount asked for matters as the number of existing shares is fixed.

Put simply, the more money they want to raise from the new shares, the more they will need to ask from each of us. I really can't see how you are arguing against that??

Sorry - should clarify that an offer price of 30p for new shares is impossible for where the sp is now (3p). There may be a small premium but in my view the offer price for new shares will not be much higher than where the sp is when they set the terms - and more likely will be lower.