The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
Isn’t the point of the dilution that, if current shareholders decline to take up their rights and the new shares are bought by IIs, then existing holders will be 95% diluted?
How can IIs be asked to pick up the tab without PIs being diluted? Will holders vote that through and will there be enough II interest to complete the rights issue if PIs don’t get their cheque books out?
Thanks Cupid, really helpful. Also now found it in the scheme docs - para 3.2.4
That’s it then - 19:1 is official. The question is whether holders vote for it. My money is still on £70m meaning existing holders need to find 15p per current share to avoid dilution.
TheMadStork - I accept that 19:1 is going to be the dilution - it’s been mentioned in too many RNS announcements for it not to be. Not even Gary and his gang would want to get caught out making more statements that turn out not to be true.
But where is it written that the 19:1 dilution is a condition of the scheme? I have been looking for this and I couldn’t find it in the scheme documents. A rights issue, yes. But 19:1?
Colin, it’s clear the dilution is 19:1
There are around 475million shares in the company today. At 19:1, the rights issue will create around 9 billion new shares.
The minimum raise is £15m for the scheme. To raise £15m from 9 billion shares, each new share would be worth £0.001667 or 0.1667p. You would have to buy 19 of those shares for each existing share, which would mean around 3p.
But Amigo has to raise more than just the scheme contribution because it wants capital to lend out. The RNS of 6 December 2021 gave an indicative number of £70m. To raise £70m from 9 billion new shares, each new share would be 0.7778p. You’d need to buy 19 of those for each share you hold, which comes to approximately 15p per current share. If you have 500,000 shares today, that’s around £75k.
Obviously all depends on how much they decide they want the rights issue to raise. But the less they raise, the less they can lend out, the lower the profits. The results presentation shows loan book of approximately £700m in April 2020, so £70m raise (of which only £55m will be available for lending after scheme contribution) doesn’t seem like a very big number.
Colin, if the rights issue attempts to raise £70m (RNS 6 December 2021), it’ll cost you around £75k to take up all your rights.
If £70m is the target for the rights issue, it’ll cost shareholders roughly 15p per current share to take up their rights, irrespective of share price fluctuations.
Mtel, my best guess is that current holders will need to pay 15p per each existing share to take up their full rights.
Looks like you have around 400,000 shares, so you’re probably looking at around £60,000.
That is based on Amigo looking to raise £70m (RNS, December 2021).
I’d be interested in the video if it’s made public.
So I guess the question for the optimists is whether you think you’ll be confident enough to take up your rights when dilution happens? Would you be prepared to cough up 15p per current share to take up those rights (which would generate around £70m)?
By my calculations, if Amigo needs to raise £70m from the rights issue, shareholders who want to avoid dilution will have to find around 15p for every current share they own.
If it’s £90m, it’ll be around 19p for each share.
Stevielad, let’s be honest here. Amigo have played pretty fast and loose with the schemes (and the truth) so far, haven’t they? It’s not inconceivable that Gary and his board are up to more dubious shenanigans.
But I don’t think it’s actually against the rules for the BoD to encourage a certain way of voting, provided they give accurate info to creditors (which judge concluded didn’t happen last time).
HH, the incentive is that the pence is the £ is higher, which makes people more likely to vote in favour.
If you reduce the number / value of valid claims, the return (from a fixed cash pot) to those who are successful is higher. But the number of people who are successful is lower.
I don’t think there’s much weight in the 41p v 31p number. I think it’s the relative outcome that people need to think about. It could be 82p v 62p if fewer complaints are upheld. Or it could be 20p v 15p if more are upheld. But there’s no doubt 42p looks harder for the FCA to oppose than 10p (as in Scheme 1).
LTH - I don’t think that’s true. I believe customers have to request that their case is checked by the adjudicator.
It’s also unclear what the role of the adjudicator is - do they simply check that Amigo has followed its own methodology or are they free to reach their own outcome based on their own criteria (if they think Amigo’s method has reached an unfair outcome)?
Viking - straw man argument!
Aguero obviously isn’t saying that non-valid complaints would get upheld outside the scheme. He is (obviously) saying is that Amigo might be too strict not not uphold every loan that should be upheld (and would’ve been upheld at FOS).
Administrators have a legal duty to pay everyone who has a valid claim (and not to pay anyone who doesn’t). So claimants might feel that administrators would be a more impartial judge of what should be upheld than Amigo.
Beastly - you make the point. Amigo shouldn’t have been assuming anything. They were supposed to check the loan was affordable. Given they specifically target people who they know can’t get mainstream credit, I’d have thought doing a decent check was fairly important. I haven’t made any assumptions about Toms, Dicks or Harrys - Amigo itself admits it’ll uphold 65% of claims and FOS was upholding 80%+. We don’t need to take the claimants word for anything!
And no, I’m not Sarah. Yawn.
Viking - I have no idea. I don’t think they typically do add interest. I think they buy it so cheaply from the lender (20p per £?) that they can afford to settle with customers for much less than the nominal outstanding balance.
Having said that, neither Provident nor Wonga did sell their outstanding loans and ended up writing off the tail end of their back book because so many debt purchasers knew there were likely to be problems enforcing the debt. With Amigo anticipating upholding 65% of claims, I imagine it would face similar problems.
Beastly, again you talk about misinformation without examples.
Or has this board redefined “lies” and “misinformation” to mean anything that’s inconvenient for the interests of shareholders?!