Member Info for Hexam

Yeah - I saw that entertaining spat.

Don't want to start another one but I think I'm right as per the RNS:

"The Rights Issue price of 410 pence per New Share represents a discount of 35.8% to the theoretical ex-rights price of 638 pence per Existing Share by reference to the closing price on 8 September 2021 (the last Business Day prior to the date of this announcement)."

Agree Slim but isn't the TERP 638p as per RNS - or from calculating it (789x47+410x31)/(47+31)?

smalltrader - I could be missing something but what would be the logic for another drop given that the shares are already trading with the full knowledge of what the RI is and the price has already fallen by more than what the discounted price and number of new shares would imply?

Not that familiar with the RR example but I think their increase in shares was much more (10 for 3) so the ex-rights price would have already been driven far closer to the discount price than is the case with EZJ plus it looks like the sp bounced back quickly.

@flushfrank

Nice to see you thinking about investing - and doing some research before you do!

First off though I think you've missed a zero off on your mining average which is actually closer to £7.5m per month.

This is revenue obviously, not profit. Mining margin is over 80% but this only allows for electricity and hosting costs. To allow for other costs (mainly the cost of machines) using 60-65% is probably good enough for a fag packet. So this would give around £50m p.a. profit before tax on current mcap of £580m - so sp already looking pretty cheap perhaps?

The growth in profit will come mainly from increased mining and (hopefully) increasing BTC value.

Mining is expected to increase about 50% due to new machines expected before the end of October.

And then there's Texas. They are raising about £100m from the IPO which will bring mcap to around £680m (not sure where you get £611m from)?

If they fully kit out Texas with machines using all the power available then mining could increase a further four to five fold - though will cost much more than £100m to do so. However in terms of profit the 60-65% margin should hold up pretty well as most of the costs are electricity/hosting plus the machine costs which will all rise in proportion - and probably less as greater efficiency is expected which will should offset any faster rise in other costs (like in building the Texas infrastructure).

To complete Texas the mcap may be closer to £1bn (at today's share price assuming funding via further dilution) but with the upcoming 50% increase in mining, profit before tax could be £75m p.a. and then with Texas this could be £300m+ p.a.

Then as you say there is BTC price. IF this doubles to the $100k many are expecting (though of course no guarantee) then could double all the above numbers but care needed here as increasing BTC usually means increased mining difficulty and so some of the gains will be offset. On the other hand the current (and future increase in) HODL will go up in proportion and these increases will feed into profit.

Finally they are also diversifying into wider activities (including investment in Pluto) but these are probably best left off a fag packet calculation as much more uncertain what such activities will bring and with the prospect of over £300m p.a. profits already without them it almost seems greedy to factor them in!

All the above sounds very bullish but of course there are many risks (BTC value is the obvious one but take a look at the IPO prospectus where a long list of others is given).

Anyway, hope these ramblings help with your research and let us know what you decide!

Thanks IC. It can be very confusing, especially if going through for the first time. Hopefully it made sense and I haven’t said anything misleading - hopefully someone will shout if I have.

I would add though that if anybody is unclear what buttons they actually have to press to make the choice they want, or to clarify the choices available, that they really should speak to their broker/provider.

Sha3075 - not quite sure what you mean but the direct impact of the dilution - in particular the discount - is already priced in (that’s why it dropped so much from 789p - the price just before the RI was announced). Any price movements now are due to normal market reactions to news and general sentiment (including about the RI).

No problem NC. Hope the typos didn’t confuse - ‘do’ should be ‘sp’ near the end!

One thing I should clarify - I said if you think the sp will go up then this suggests taking up the rights. It’s not as simple as that as most of us here obviously think the sp will go up (as we’re still invested). It’s more about whether you feel it is worth investing more - and of course that you have the money available to do so - or are happy with your existing number of shares. Good luck whatever you decide to do.

NumptyClub - You should be seeing two lines for easyJet. One will be your original shares which should have a price around 593p or whatever the current sp is when you read this. The other should be your right to buy new shares and these should have a price around 183p i.e. around 410p less than the sp and will move in line with it.

Your main choices are either to:

a) sell these rights at 183p each
b) take up these rights and pay 410p for new shares (you are entitled to buy 31 new shares at this discounted price for every 47 you currently hold).

Note the price of 410p is fixed and is the difference between the sp and the value of the rights. This means there is no difference in value between each choice and no-one should be advising you to do one or the other. It should be your choice depending on whether you think easy sp will go up in the future (so take up the rights) or down in the future (so sell the rights). In other words do you want to do increase your stake in easy or effectively reduce it?

Please also note that although you are buying shares worth 593p for just 410p (or selling rights for 183p) this does NOT mean you are making a quick profit even though it looks like it. The value of your existing shares has simply gone down and in theory this should offset the value of rights you have received. In fact the sp has currently fallen by more than needed for this and this is why the rights are showing as losing money at the moment.

If you take up the rights and invest more you will end of with 31 more shares for each 47 you held. So if you had 4700 you will end up with 7800. All priced at 593p (or whatever the do then is).

If you sell the rights you will get no new shares but end up with your original holding i.e. 4700 in the above example. Again these will be valued at 593p. Note that you do have the options in between - i.e. sell some rights and take up the rest.

Sorry for the long explanation but hope it helps.

"I was solely and exclusively demonstrating what the effect is if the ex rights holds up compared to a heavily discounted share - a basic freebie."

Exactly - which is what I am saying is not true in the example you gave or for anyone in EZJ. Buy the rights, sell the rights, do a bit of both - and the answer's the same in each case at the point you do it. So not squirming and not going off on a tangent, I just tried to explain it several different ways and sorry I failed with you but hopefully not with others.

But as you have become abusive (just as another poster correctly predicted you would) then I will leave you to whatever you want to believe.

Blue - Everything I have said I believe to correct so no apologies there and I don't think at any point I have shown nastiness or bile but if I have come across that way then I do apologise.

What I do feel strongly about is that people have the right information on which to base their decisions especially when it comes to something important like taking action on an RI - which may soon be relevant for IAG. That's the only reason I've prolonged this debate so long as I've given up trying to convince you but hopefully others will not think that somehow taking up a rights issue (or selling those rights) automatically leads to profit - it never does - it's what the sp does next that matters.

So no more from me other than to clarify that I was not "employing a scenario where you are selling your existing share from a pre RI higher price to fund a new share purchase". I was simply saying that automatically the sp of your existing shares drops when an RI is announced (just as it did with EZJ) and it is this drop that offsets the value of the rights gained.

So I am not in a pickle at all. Nor do I have a 'group', they were just strangers that happened to agree with me. So go on believing that we are all wrong and you are right - I have no problem with that - but hopefully others will not be misled.

Amanensia - That's not how I'm reading it. The fact they give a number suggests to me either these shares are outside of the IPO or they represent known intended purchases by those (like directors) connected to the company - or a combination of the two.

The main point I conclude from it is that for normal purchasers i.e. anybody outside the company, including IIs, will not be subject to any lock-in. But that's just my take.

This really is getting boring. I don't understand half your ramblings but again, for the avoidance of doubt:

You have two choices in an RI. Either take up your rights, in this case pay 410p, or sell your rights which will be roughly whatever the current market price is less 410p so if EZJ is 580p then you well be able to sell at about 170p.

So you either pay 410p now for 580p or get 170p in cash. In both cases the "value" is 170p so it makes no difference which you do. This is the same whatever the sp is. If it is 680p than then you pay 410p for a 680p share or can get 270p in cash.

What you seem to be thinking though, and suggesting to others, is that the 170p or 270p is profit. It is not. It is something paid for by the reduction in value of the shares you already held. If the sp is trading at 638p then this is the point where the reduction in share value matches the value of the rights.

For anybody deciding whether to take up the rights or sell them the only consideration (assuming you have the cash to buy more shares) is what you feel the price is going to do in the future - just as with a normal buy or sell decision.

There is never any profit or loss difference between the choices you make at you the time you make them - you are simply deciding whether to increase your holding or reduce it. The one thing you should not do is nothing as then you risk losing your rights for no value.

Blubay - I don't think the lock in applies to the vast majority of buyers any more - just a few 'insiders'. This is from the latest filing:

"ADSs sold in this offering may be resold in the public market immediately without restriction, unless purchased by our affiliates. Upon completion of this offering, we will have 456,832,335 ordinary shares outstanding, approximately 12,398,891 of which will be subject to 90-day lock-up agreements entered into by our directors and officers and certain of our shareholders"

Big Blue - I have not moved the goalposts. They are fixed. The theoretical Ex-Rights Price of 638p is fixed. As long as the price is below this people (like me) have lost out since the RI announcement, if it goes above this then we are running at a gain.

If I tap your numbers into a calculator then yes I will get the same answers but it is your method that is wrong not your sums. Just looking at my own investment I can see how much its value has fallen since the RI was announced. No calculator needed for that.

But I'll give up trying to argue as it's like trying to convince someone who believes that the earth is flat or that climate change is some kind of political hoax...

The more important thing is that others aren't misled by your nonsense, even if you will never admit that you're wrong, as there is a prospect here of a possible RI too, though hopefully most already understand how RIs work anyway. For those that don't and want to know then maybe just do your own research rather than rely on this board.

But for those with EZJ shares and for the avoidance of doubt the statement:

"I have proven that the buying the right generates x amount of profit when sold at the same level of buying." is FALSE. You are buying shares at 410p that are worth 410p. You cannot magically make 170p profit. It's not alchemy.

5 shares would have been allowable but I suspect they wanted to make sure they were over $10 which appears to carry some importance in the US given how many IPOs launch at exactly this price (or above).

It sounds a lot to us but we are looking at it with UK eyes. Really don't see it as a problem at all from a US perspective.

Thanks @600 for your compliment - always a pleasure reading your posts too.

One other interesting nugget I've found in the prospectus is in respect of the repayment of the Galaxy Loan. It reads:

"We expect to repay $25 million of the principal of this loan with the proceeds of this offering and convert up to $20 million of the principal of this loan into mining machine financing upon receipt of machines and satisfaction of other conditions."

So they aren't using $45m of the fund raise to repay the whole loan, just $25m, and are rejigging some of the loan to pay for more machines which sounds promising.

Anyway really hope the body holds together and in the meantime have a wonderful day with your grandson!

Cheers, H.

Sorry Henrythecat - didn't see your reply. Yes, that's exactly the point being made.

oh dear oh dear oh dear indeed

As nothingforever has said though this is the IAG board so if you want to see a correct worked example with the right starting point of 789p as the pre-rights issue price wander over to the EZJ board where I gave one there.

For info though the flaw in your calculations is that the 112030p profit on the new shares is more than wiped out by the loss from 789p going to 580p on the existing shares. The breakeven point is 638p, the theoretical ex-rights as confirmed by EZJ in their RNS.

Though this is the IAG board there may be a Rights Issue here so it will then be important to understand the implications - and spreading the thought that there are big gains or even free money to be had because of an RI is nonsense and irresponsible.

@600 -Great post but I'm afraid I'm not quite sure where you have got some of your numbers.

The maximum they think they'll get from the raise is $158.7m (or $144m after discounts, commissions and expenses) according to the prospectus, rather than $118m. I think you've confused £ and $? The maximum number of ordinary share equivalents is actually 75m plus the 11.25m the underwriters have the option to purchase - so 86.25m in total (in the form of 8.625m ADS). Note that 8.625m x $18.40 is how they come up with the $158.7m on the front of the prospectus. Also whilst the build for Texas is indeed around $80m this is only for the infrastructure - the machines are extra.

Finally where does "Bids have been invited between 133 and 158p for the ADS" come from? Haven't come across this but obviously I could just have missed it.

Sorry for the 'red pen' but to be fair you did start with "Have I got this right?" ;-)

Agreed @600 - the two prices will broadly run in parallel as any small gaps that open up between them will be quickly closed.