The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
Interesting stuff Catbert. To get an idea of what we can expect I decided to have a quick look at one of the ‘example’ companies that Lanstead name on their FAQ page to see how they notified during that agreement - AFC Energy.
The original placing was for £2.2M and AFC received a total of £4.7M in payments, so worked out well for them. The share price dropped 26% to10p the day the deal was announced on 8 October 2014. Nine months later the share price hit a peak on 60.2p and when the deal ended in April 2016 the price was 14.82p. Anyway, TR1s / notifications as follows -
1) Initial notification of holdings (20/10/14): 23,100,000 shares, 8.058%
2) TR1 (7/4/15): 19,311,000 shares, 6.6888% (crossed 8 & 7%)
3) TR1 (7/10/15): 11,141,182 shares, 3.8447% (crossed 6, 5 & 4%)
4) TR1 (23/12/15): 9,031,193 shares, 2.9% (crossed 3%)
So, after the initial notification of holdings they notified a further 3 times during the 18 month agreement - often have already crossed numerous 1% thresholds. I’ve got no idea if this meets the applicable rules or not but I’d be surprised if Lanstead didn’t adhere to at least the minimum requirements.
Something I found quite interesting (other than that Roman Abramovich owned about 13% of the company at the time) was the sell down rate. The sell down rate between the second and third notification was about double the rate from the first (initial) to the second. That was also when the SP was the highest. The sell rate drops back a bit between the last two notifications.
I just glanced at IMM, the other AIM company mentioned. They seem to be on their second Lanstead deal which started around the same time as ours and also had their last notification on 28 December.
L‘m also now fairly comfortable with the Lanstead deal, especially when reflecting on where we are now and where we were when it was arranged. Without making any judgement on how the company got there, the situation early last autumn was pretty grim. Funds dwindling despite Eileen’s lifeline, exploration grinding to a halt, director salary sacrifices, no sign of the JVs and project level funding that had provided some optimism in the spring… other than the Canadian investment bank circling overhead looking for a bargain. A conventional placing would likely have been at a terrible discount, and rumours were that the company had tried and failed to arrange one. Potential partners no doubt concerned about topco funding. So, a deal was done. Substantial dilution and a long term net seller (of course Lanstead could, like most of us, have become increasing upbeat about the ORR story and may hold some of their shares for a longer term). But the company survived, which it might not have done, and is a big step closer to unlocking potential value, which could be considerable. Good news was required to make the deal work and the good news flow has begun. The higher the share price goes the better the deal is for Oriole, Lanstead… and us. My opinion anyway.
Todays RNS was a great read and hopefully we’ll get some price moving news soon.
With regards to Lanstead I think my post yesterday was too rambling to make my point - ORR told us that Lanstead’s interests are aligned with theirs, and ours. I’ve recently spent quite a bit of time looking at this and as far as I can make out that is true and there isn’t an incentive for them to suppress the share price. The agreement is stacked in their favour and the higher the share price the more money they can make, even after making the associated higher monthly payment to ORR. They always have to keep enough shares to cover future monthly payments, so can't get too far ahead of themselves with selling down their holding. Of course they are a large net seller which is a drag, especially if they sell when buying volume is low, but I’m now fairly sure they’re not deliberately holding the share price back. Can’t explain the recent share price movement though but I suspects its just general market malaise, lack of substantial news and MMs doing what MMs do etc. Just my view and Lanstead could indeed be the villain.
From the ‘Lanstead will declare every 1%’ interview on the 1st August -
Tim Blythe: ‘… can Lanstead actually benefit though by the share price being lower than the benchmark price rather than going higher?’
Bob Smeeton: ‘Lanstead make more money the higher the share price is. They’ve got no incentive at all for the share price to decline so they very much see themselves as aligned with the long term shareholders. They will do well when Oriole does well and Oriole will receive more money should the share price do well…’
I’ve tried to do some modelling to see how the deal could work for Lanstead. Obviously, I have no idea what Lanstead are doing but I have made the following assumptions: Lanstead sell an equal amount of their allotted shares every day for the 24 month duration of the agreement. Considering the subscription shares and the value payment shares and assuming 252 trading days each year (21 per month) then that’s pretty much £2M shares to be sold each day, as estimated previously by others. I’ve also assumed that the average sale price for these shares in the 21 days leading up to each settlement day is the same as the 20 day VWAP on the settlement day. Ignoring fees or any other costs then -
At benchmark price 0.2533p:
Share sales (21 trading dates x 2M): £106,386
Payment to ORR: £73,625
Lanstead profit: £32,761
At 50% benchmark price 012665p
Share sales: £53,193
Payment to ORR: £36,812.50
Lanstead profit: £16,380.50
At 200% benchmark price 0.5066p:
Share sales: £212,772
Payment to ORR: £147,250
Lanstead profit: £65,522
So, based on my assumptions, Lanstead monthly profit is £32,721 at benchmark price and, like the monthly payments to ORR, that figure increases / decreases with percentage change from the benchmark price.
I adjusted my model to see what the minimum number of sales Lanstead would have to make to cover the monthly payments to ORR. With my other assumptions remaining the same then they would have to sell around 1.384M shares each day for this. Gives an idea of how many shares that they have to retain to cover future payments and how many that they could sell whenever it suits them.
I had previously thought that they might try and manipulate they price to maximise their revenue from share sales and minimise monthly payments. I’m not sure that could be practically achieved or even worthwhile.
Perhaps Lanstead and our interests are well aligned. All we know is that by 28 December they had sold 202.4M shares. Equivalent of 2.024M per trading day up to that point (100 trading days) which is in line with my model.
The above is based on my understanding, is unchecked and could be nonsense.
@cekim, I don’t have the brains to work it out but I use tradingview which has a nice vwap indicator which I’ve been using to update a spreadsheet. I think Oriole should have received around £395k from Lanstead so far. I’m assuming that the settlement date is on the 18th of the month and have used the closing 20 day vwap from the previous trading day -
18 Sep - £32,380 (RNS 29/9 gives first payment as £0.03M - so correct ball park))
18 Oct - £26,014
18 Nov - £24,473
18 Dec - £48,860
18 Jan - £65,690
18 Feb - £112,777
18 Mar - £84,583
There should be some info in the final results which I’m hoping will be released this week.
I thought the reaction to the two 7.5M trades yesterday was odd. Looked like buys but smelled like sells.
Need some news to get things moving again and the volume to soak up any Lanstead sells.
Bibemi drilling was supposed to start during Q1 so hopefully hear about that soon. Also, the final results could be released anytime. Might not include anything new but could have some clues about what Lanstead have been up to - although if ORR have been updated then they should already have issued a holdings RNS. Should be an incentive for them to chase them up anyway. The last two final results were released on the 9th March and year before was on the 24th.
I agree that Lanstead’s average sales volume will probably be fairly steady over the duration of the agreement. Although, as mentioned before, I also think they may play tunes with the daily / shorter term volumes. The RNS on 28 December, referred to in the post below, shows they sold around 20% of their shares after about 20% of the agreement duration.
They could end up exposed if they got too far ahead of themselves with their sales. If our wildest hopes and dreams come true, and the share price becomes multiples rather than fractions of a penny, then Lanstead would be in a spot of bother if they hadn’t retained sufficient shares to sell at these prices to cover the remaining monthly payments, which would be at a significant premium to the baseline. So, I think they have to pace themselves which means they will remain a drag until the end of the agreement. My thoughts and understanding anyway.
Would be good to get an update and if Bob was expecting one after every 1% then I hope he is chasing them up.
… some further thoughts on Lanstead. One thing I’m sure about is that Lanstead are only interested in Lanstead. I expect they will have a smart strategy to maximise their revenue from share sales and minimise the monthly payments to ORR. As per my previous message, I would surmise that they will sell heavily, and carefully, into any post news share price spike (more than 1.2 billion shares changed hands in the three trading days between 19th and 23rd January) and when the price and volume begin to fade they may be tempted to help encourage the price decline and reduce their sales until the next price spike, to try and minimise the monthly payments to ORR. I’m not sure how much Lanstead ever cared about the health of ORR’s finances but now that BCM are onboard, and paid up, I don’t think this will be much of a consideration for them.
We know from the Lanstead deal RNS (1/8/23) that the monthly payments are based on the average VWAP over the 20 days preceding the monthly settlement date. With the £73,625 monthly payment pro rata’d up or down based on the % deviation from the benchmark share price of 0.2533p.
I think the settlement dates are around the 18th of the month. I can’t find this documented anywhere but the above RNS states that the settlements commence approx 6 weeks after admission of the new shares which I think occurred on 7 August. February will have been the first time that the VWAP20 was above the benchmark price on a settlement day - it was 0.377p based on closing prices and using a TV indicator (actually on the 19th as the 18th was a Sunday). This will have been the first time that ORR have made money, at Lanstead’s expense. Based on this the payment would have been about £109,580 - a premium of £35,955. (Lanstead made money from all the previous payments which were are a discount).
So, let’s say the VWAP20 reduces to 0.2533 on the next settlement date. That would mean that Lanstead would save £35,955, compared to February. If it’s less than 0.2533 then Lanstead will actually make money (again). I see that as an incentive for Lanstead to encourage a drifting share price to move further down and then wait for the next spike to ramp up selling again. Of course they will have to sell some shares to do that and they will be sold at a discount to the prices that we hope to see in the not too distant future. So, there’s a balance to be struck but I’m sure they have the brainpower and skills to do it. This would make the share pice more choppy than otherwise but hey ho the fundamentals remain so in the medium / long term this makes no odds.
Just my thoughts and Lanstead may have absolutely nothing to do with the recent share price movement.
Hello fellow LTHs. I’ve held ORR shares since spring 2021 - got caught in the bear trap that saw the price recover to 1.2p after the spike to almost 2p. I averaged down after Eileen Carr’s large subscription, then some more just above last years lows and more again after the BCM deals were announced. Now have a reasonable profit. I have a core holding that I intend to retain as long as my nerves permit and some short / medium term holdings that I will probably offload at the next opportunity. I don’t buy AIM shares anymore. This is now my only one and will be my last.
Like most holders I had my concerns about the Lanstead agreement - probably amplified by all the ‘death spiral’ chat. But at the moment it appears to have been a good call during a difficult time for the company and market. It perhaps saved the company.
Anyway, the recent share price decline made me reflect on the agreement and Lanstead’s motivations. As a significant holder and seller its easy for Lanstead to manipulate the share price downwards, if they want to. They can sell into buying volume which should be fairly share price neutral or they can dump into low buying volume which you would expect to drop the share price. As I understand it, a high share price suits Lanstead when they are selling shares and a low share price suits them when the repayments to ORR are calculated.
As I see it there is no ‘expected’ news for the next few months that will significantly increase the share price. Bibemi drilling results 3 months or so after they start drilling - will hopefully be big when it lands, but is a while away. Looks like the next 6 months or so will be slow at Mbe with only soil sampling and trenching. So, it makes sense for Landstead to bring the price down with minimal, but clumsy, selling to reduce their payments to ORR for the foreseeable.
Of course there’s plenty of other potential news that could shake things up in the meantime -
Senala license renewal / deal with Managem.
Bibemi exploitation licence - maybe not that price moving.
Other CLP JV’s
Wapouze limestone (cement) exploration / partnerships
Ndom & Gamboukou lithium exploration / partnerships
Legacy assets - well overdue news about the Muratdere EIA. Elephant Oil IPO - I’ve lost track with that one.
As someone has already mentioned today, it would be good to get another TR1 and see where Lanstead are with their holding.
Just my thoughts and ramblings. Possibly nonsense.