FRR Update21 Sep 2018 12:08
Laks just to keep you in the picture I've copied one of my posts from today and one from last night which I think you will find interesting.
IMHO the following is what happened :-
YA assumed it was business as usual and forward sold FRR shares it did not have and then presents FRR with the preference shares for them to be converted into ordinary shares. FRR gives them a cheque for the cash instead. YA then borrow the shares from someone like Spreadex (which would explain why they were closing their shorts on Monday pm). They continue shorting and use the borrowed shares to cover those that have been forward sold, that they expected in August. They now need shares to cover the borrowed shares and present the September batch of preference shares for conversion into ordinary shares, assuming FRR has scraped together the money from oil revenues over a number of months. They get another cheque from FRR. YA now realise that they aren't getting anymore shares from FRR, but need to buyback the borrowed shares, so they serve a default notice on FRR, knowing it will have to be RNS'ed. This drops the price allowing them to start buying back the borrowed shares.
FRR then RNS the market, stating that YA has sold shares it did not own and also disputing the conversion prices. FRR' registrar will know now the dates, amounts and prices of the trades when YA forward sold, as they were the ones they had to wait for until YA managed to borrow shares. This is why FRR is also disputing the conversion price, which should be the price prior to the illegal naked shorting.
Preference shares can be viewed as as cheque to be cashed at anytime in the month for ordinary shares (see Lumbumbashi's earlier post). They are converted with a 10% discount to the 5 day weighted average price prior to the request for conversion, although now dependent upon which form of payment FRR chooses. This explains why there's no payment date each month, as YA could wait until it had lowered the price enough to get more shares than it had sold, plus the 10% discount. It also explains why the September conversion was requested early in the month. This type of borrowing especially when abused, also has the affect of lowering the market cap. and increasing the prospect of future borrowing resulting in even more shares. Hence, why it is often called Death Spiral Finance.
I have stated that until a more plausible theory comes along I would stick with my share swop theory. I now have another theory, as that there are new facts to add to the situation. IMHO the cancelled trades were YA forward selling shares they didn't have in April, May and early June, to push FRR for another contract before the 16th June deadline. They just continued forward selling via their broker, but cancelled the trades when preference shares were not converted by FRR. They continued this until they had a new deal with FRR announced in the 7th June RNS. The redemption of the last convertible shares from the previous
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