Member Info for Hexam

Eddie - res 2 was covered in the previous IPO filing (had nearly a page on it) so needed to be rewritten (and now has) so that investors could have a correct up to date prospectus on which to base their decision.

Have now found the reference to the new galaxy loan (page 83). The wording around equity incentive plans also appears reworded and seems now to refer to the 2018 plan. Interestingly this plan seems to have the same maximum number of shares that can be issued to employees as the resolution that was rejected!

Anyway fairly sure this is just a revised filing with the amendments required following the failure of resolution 2 and the new Galaxy loan. So no big deal though may obviously have held things up a little.

Isn’t this just an update to the previous filing to allow for recent events (e.g. failure of resolution 2 and new Galaxy loan). I can only view on my phone so can’t easily check these - but certainly looks like all the pricing is still blank?

Lotto - must admit I’m not a fan of that measure as it is often misinterpreted (including on this board) as meaning ARB make a profit if BTC price is above this level. It doesn’t - in particular the ‘direct’ costs used exclude the cost of the actual machines themselves.

That said, by whatever measure, ARB is efficient - just care is needed in interpreting numbers or comparing them between companies.

Agreed Wolf but wouldn’t the terms of further loans get progressively worse if the value of assets backing them (i.e. BTC) is falling or some of the BTC is tied up already? May get into unsecured loan territory, though no idea if they can still access the £100m facility and on what terms?

Lots of ifs and buts - main thing though is that the scenario described, though possible, is very unlikely so not too concerned. Just glad they are spending the money which means things are happening (over and above the £32m of machines already paid for).

“The loan repayment schedule has been brought forward (from end of year to 26 October) not put back. I see that as a positive.”

It makes it even more likely the IPO will happen but also more likely it is later than they were expecting. I’m not raising a possible delay to be negative (and I don’t think it is necessarily negative) but more to manage expectations which have been fever pitch - since May! If the IPO happens next week then great but if it is another month away but PIs are waiting for it every day it’s just going to mean more frustration and disappointment. So yes, to me it is a positive as I’d rather have more certainty over the IPO than speed.

“The intention was to launch the IPO in Q3, which is this month”.

Yes - but the need for another short term loan suggests it is not imminent so Q3 must now be in doubt. No big deal, just have to be a little more patient for the IPO and in the meantime the loan means the funding is available so there are no delays to the build.

Whilst I agree this means they expect the IPO to have completed by October 29th it also suggests the IPO will be later than first thought so maybe a few weeks away at least.

Other than that I don’t think too much should be read into this. They simply need cash urgently for the expansion and have raised it short term in lieu of longer term solutions (of which the IPO is one). And they will continue to fund the expansion (which we know will cost several hundred million pounds) with a mixture of loans, equity raises and selling BTC and today’s choice happens to be a short term loan.

@600 - Agree, the financials and strategy would suggest a higher price but maybe there is just too little familiarity with the business or too much wariness over BTC volatility?

Whatever the reason I don’t think it matters as ultimately fundamentals should win through eventually and I have confidence in these. Hopefully that conference is well placed - time will tell but preferably not too much of it!

“Makes sense to hold onto news that will cause a jump in the SP until after the uplist.“

Makes absolutely no sense to me so hopefully somebody can explain why the company would want a lower price at IPO and hence less capital raised (or issuing more shares and hence more dilution for the same capital)?

Flower - just to be clear the ‘you’ was a general ‘you’ not aimed at yourself - or your pub spending! I don’t usually butt in on arguments like that but generally I like both Wolfs and your posts and so was surprised you were disagreeing so much - but then thought actually you could both be right! Butting out now :)

Wolf, Flowerpot - I actually agree with both of you. May seem odd as you have opposing views but I think it depends on what other assets you hold and how you intend to pay the loan back. For example although ARB do have a shot term loan with BTC as collateral they have other sources of funds (e.g. IPO, other loan facilities) and I doubt they will pay back the loan just by selling BTC (if at all).

However, if you take out a loan and spend it but your only asset available to repay the loan is BTC then tend to agree with Wolf. If BTC drops then may not be able to repay the loan fully but even if you can then will be forced to sell BTC at a lower price.

Bit like negative equity with mortgages. Big worry if the house is your only real asset, not such a problem if you have other things to play with.

I agree AB and personally can’t see them issuing for less than $10 (so at least 5 for 1) as this will sit better with US investors and doesn’t make any difference to the actual raise - just the number of shares each ADS represents.

Of the two think the second is more likely as in US appears to be popular issuing shares at about $10 but obviously both options have identical dilution impact.

AB - Yes, we may miss out on some buys IF it surges but that will only have a short term impact on SP so will be important for those looking to trade.

Obviously the only time the SP matters is when you want to buy or sell and that applies to both investors and the company (at raises like this). So as a LTH I’m not bothered by any short term swings only the price at IPO as that impact will be permanent on the number of shares in issue. So I’m hoping for a rally very soon before the IPO!

Chuz - as it’s an IPO on an existing share rather than a rights issue or placing I’d be surprised if there was any meaningful discount (or premium). Personally I expect it to be very close to the sp at the time the price is set. Could be wrong though!

AB - “BTC pullback is good and it suits our IPO timing”

How? Surely the lower the sp at IPO the greater the dilution will be as more shares will need to be issued to raise $75m?

K3 - It wasn't the NEDs who lost out in today's vote - the resolution about them got passed.

Lotto - I'm pretty sure the £32m for Core Scientific is for 530PH not 430PH. That price still seems a bit toppy to me but may well be what £32m bought depending on exactly when the deal was struck and the going rate for machines at the time. I agree though that the communication around new machines has not been great (anyone know what happened to the 80PH that was meant to be coming on line in July)?

I'm not a blind follower of PW and ARB and think it is very healthy to challenge but in the case of the incentive scheme I would hope that PW knows a lot more than me about what is appropriate for the business, especially as regards what is expected to be competitive in the US. My reading of the scheme is that it cannot be more than 10% of total equity at any time i.e. ever be more than 10% dilution in total and personally I'm comfortable with that. Clearly others are not and have expressed their views, as they have every right to do, by voting 'no' but I still think it's an own goal.

Chuz - I don't think it is right to compare number of shares as RIOT's are over $34 each so suggesting ?the potential 76m of Argo incentive shares is pretty much equivalent to RIOT's complete business is very misleading. In terms of mcap it is only about 5%. Still a little chunky though.

Pop - The reason I think it may impact the IPO is simply that this scheme gets a big mention in the prospectus and was referred to as being expected to pass at the GM. Obviously it didn't so nifty re-writing at least is needed as in the land of litigation a misleading prospectus is surely going to be easy prey for the lawyers? Hopefully that's all that is needed so that there won't be any real delay and that I'm wrong to think that they may want to replace it with a revised, approved scheme first.