Member Info for Hexam

No, I'm not...

In this example if you hold 1 share at 3.5p and can buy 19 shares at 0.17p then the expected value of shares after dilution is:

(3.5 x 1 + 0.17 x 19) / (1 + 19)

= 6.73 / 20

= 0.34p

So if you hold 10,000 shares they are worth £350 now (at today's sp). If you take up the rights you pay 19 x 0.17p x 10000 = £323.

The value of your holding is then £673 or 34p for each of the 20,000 shares you now hold.

"buying after the RI means you buy at the bottom (fractions of today's price)"

That's because you'd be buying a fraction of a share as there will be 20 (or whatever) then for every share there is now.

@5532mr

If the RI is on the terms you suggest then the price after RI would have to be above the Theoretical Ex-Rights Price (TERP) after dilution for you to be in a better position which I make around 0.34p based on today's sp. Whether it is or not will depend on sentiment at the time.

However, there is lots to happen before then and the RI may not happen at all but assuming it does then by then I personally think the SP will be higher than 3.5p before dilution as if it gets to that stage Amigo will already be further along the road to survival.

"In theory, the share price will not drop as low as the rights issue price so it should leave a small profit, if you take up the full allocation."

Sorry - this is not correct. If you take up the rights you don't instantly get a profit as the difference between sp and the rights issue price is matched by the reduction in value of the shares you already own.

See attached - in particular the bit:

"So, in theory, as a result of the introduction of new shares at the deeply discounted price, the value of each of your existing shares will decline from $5.50 to $4.92. But remember, the loss on your existing shareholding is offset exactly by the gain in share value on the new rights"

https://www.investopedia.com/investing/understanding-rights-issues/

IK - Must admit I'm not sure quite what you mean as the call on each shareholder will be fixed by how much money they want to raise and how many shares that shareholder has. There are 475m shares so for every £19m they want to raise they will want 4p per existing share. So if you own 10,000 shares then in order to take up your rights you will need to stump up £400. If they want to raise £38m you'd have to stump up £800 etc. These amounts don't change regardless of what the sp does - all that matters is the amount they choose or need to raise and the number of existing shares.

AB - "Out of interest did you watch the video yesterday?"

Yep, but I think that's been covered enough ;-)

*hashrate

AB - I don't think you can say for certain that the global has rate will not more than double this year. I suspect it might but obviously can't be sure.

However, if ARB can deliver 3.7 EH+ by the end of the year then yes I would agree at that stage it is likely our share will be higher than now but if stage 1 kicks off with the old machines then we will be behind the curve in the meantime for much of the year. I just can't see them focusing on old machines first other than a few for testing purposes etc. but just my view.

"I would be very disappointed if my Missus ran off with the window cleaner"

The difference is that AB is not suggesting that will happen. At least I assume not.

AB - Have to say I agree with Chuz on this one. I agree there are benefits like you say but the uplift in EH would be nothing like it would be with new machines and so I would be very disappointed if the first 100mw was taken up by old ones. I couldn't see anyway that ARB could keep up with global hashrate this year if they did that.

FP - From the IPO prospectus:

"Phase 1 of this development is currently in progress, comprising and expected to be completed in the first half of 2022, and includes the electrical interconnection, infrastructure and machine hosting facilities that are expected to support 100 MW of power capacity using immersion technology, at an estimated cost of $50 million"

"There were a couple of you tubers that believed the costs had over ran"

Hmmm - not sure couple of you tubers is much in the way of evidence but we'll know soon enough as the accounts aren't too far away and they should clear this up (and many other things like the cost of the 20,000 rigs).

Agree FP - It's presumptuous at best, and a little irritating, to call something 'smart' before the event rather than after. Let's hope it turns out to be so but it's certainly too early to say either way.

AB - The $80m comes from the original prospectus and I thought included everything other than machines but of course everything could not mean 'everything' - as when does the Texas Building stop and other supporting, and possibly subsequent, infrastructure begin...

"ps. regarding Texas, I've seen USD $120mil touted as the build cost."

AB - that's worrying as the original estimate was $80m. Do you think it includes other bits that were not in the earlier figures? I'm hoping it's that rather than rising costs but do you have any more info please?

"No doubt in 4months time , all thats said on this board will be what amazing mining percentage we have, because of the super cheap electricity cost"

FP - Actually the pace Argo grow relative to other miners (and the price of BTC, which affects everyone) will probably affect the mining percentage much more than any change in the cost of electricity (unless really huge). Just look at January, it fell from 83% to 74% and that was nothing to do with any change in electricity costs.

"You have no idea how much I hate writing this.. but.. RosieNas is right they will be sold at a discount."

IK - Yes, there is a prospect that a lot may not be taken up by those who are originally entitled to them. This will indeed reduce their value BUT it reduces the value for those taking them up too and by the same amount (as the fixed discounted price they are paying will be closer to the prevailing, lower sp). It also depends though on the demand from those that are not entitled to them which could be high if a phoenix really is on the cards. But the key thing is that today's sp will already be factoring this kind of thing in and may continue to do so but will be driven much more by the prospects for Amigo more generally.

...for clogging up the thread and board with a debate on RIs. I would not dream of advising anybody on what they should do with their investment. It's your choice - but would just urge that however you decide please do not fall for the scaremongering on rights issues (or equally for those that claim that they are actually great because they give you a chance to buy shares at a bargain price). It's all nonsense.

The RI is largely a distraction and if you are unfamiliar on how they work and what they mean I would suggest doing your own research to find out more about them. There's plenty of good info out there.

In the meantime maybe focus on the prospects for Amigo and all the other factors that may affect this and that IK tried to base the original thread around. GLA.

"There will be billions of shares flooding the market looking for buyers and you are a supreme optimist if you think that is going to raise the share price."

You've twisted what I've said. I agree, the share price WILL fall (from wherever it is at the time) after there is a rights issue - that is absolutely not in doubt. Whether the value of shares does or does not fall though (after allowing for the value of the discounted new shares) is a different matter and normally is around 50/50 given that the prospect of a RI is already factored in. In this case though if it does get as far as a RI I would say the value will be higher than it is today as simply by getting that far means the chances of survival are much greater.

I don't need to point to an article to say whether Amigo is a win for current shareholders. Obviously at the moment it is a win for anybody sitting on a profit now and a loss for the many more that are not (including me).

But I think whether it is a good idea to buy, hold, or sell at this point though depends simply on whether you think Amigo will get out of this or not. And that is a very difficult question with the sp today simply reflecting the balance of those views.

"sale of RI rights will be in the market...i.e. deeply discounted. It will not be at the issue price."

I think this statements shows you don't understand the process. The price that the rights can be sold at in the market moves in line with the share price. The holder always gets the same value at that time whether they buy or sell - whether that decision turns out to be a good one depends on what happens afterwards - just like with any other investment.

The price you can get for the rights can be higher or lower than the issue price and this is driven more by the terms of the issue.