The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
Here's the relevent section from the article
On 2 August, Dr Nelson sold 11m ordinary shares to the provider at a price of 43.96p per share, in effect securing a loan of around £4.8m under what is known as a sale and repurchase agreement.
The chief executive will pay interest to EFH until he repurchases his shares for the same price at the end of a three-year term, which concludes on 2 August 2022. Typically, an EFH client will pay interest of between 3 per cent and 4 per cent on a quarterly basis.
Dr Nelson’s voting rights on these shares are waived, but the provider would pay him any income that arises from dividends – although IQE has never paid a dividend in its history. Under the terms of the agreement, EFH is prohibited from voting on or short selling the shares. Dr Nelson retains a beneficial interest of 4.56 per cent in the company, which includes the shares sold to EFH.
IQE said that Dr Nelson will mostly use the money raised from the deal “to satisfy income tax and national insurance obligations” due on 7,681,199 share options exercised earlier this year.
There's a better explanation than mine of the actual transaction here in Investor's Chroncile
https://www.investorschronicle.co.uk/directors-deals/2019/08/15/iqe-ceo-enters-share-repurchase-deal/
You might need a subscription to see it though, I'm not sure.
No, you're misunderstanding what a share repo agreement is. He has an economic interest in the shares the moment he enters into a contract to buy them back, the same way as when, for example, you buy a futures contract or even when you exchange contracts on a house purchase. He owned the shares before the contract with EFH and the contract was a sale and a buy-back, so his economic interest was the same a before the contract ie he is still long the shares. As I mentioned before, it's basically a collateralised loan. My understanding is that he needed to borrow money to pay for the income tax on his share awards (as he didn't want to sell 40% of the shares) so effectively pledged the shares as collateral for his 'loan'.
I think the EFH story is a red herring as far as the share price move is concerned.
The repo trade with EFH is effectively just a loan collateralised by the IQE shares, although it's documented as a share sale and buyback. At the start of the loan Drew received the cash and delivered the shares. At the end of the loan period, just like in any loan, he must repay the cash. He will also receive the shares/collateral back from EFH. He has had an economic interest in the shares throughout the period of the loan.
Hi Know0. I'm not Passmore. I just posted to share some of my thoughts. For the record, I'm long CPI slightly above the current price but I'm comfortable and, if anything, would be looking to add to the position before results anticipating a move into the 40-50p range
Am expecting some good news on debt, although much of this should be factored in. With net debt (post IFRS 16) starting at £1.08bn on 1st Jan and sale proceeds of £344m from ESS (the £184m from Axelos probably won't have completed by HY), it should be down to a little over £0.7bn or £550m after Axelos completes. The VAT deferral is £119m which will need to be repaid by March of next year, so that should really be added to effective net debt.
Also, with £440m of the £765m of Private Placement Notes maturing in the next 20mths, and CPI stating in their FY20 results "The Group intends to extend the average term to maturity of its debt, and thereby reduce refinancing risk, by issuing new
long-term debt instruments in 2021" I'm hoping that the £440m PP notes will be repaid, the rest will be refinanced/extended and the RCF will be lengthened.
Possibly also more news of disposals as someone already mentioned, particularly as their target for 2021 has virtually been met with ESS & Axelos, and their market update in June said that preparation for further disposals "is also progressing well" so it shouldn't be tough to beat on the upside.
Overall, I think the share price bounce is justified as there's ample room for good news on the 6th, but I'm long already so have an axe to grind like most people posting here!
HeresHopin is correct I think
price yesterday = 225p x 228mm shares = cap £513mm
placement @ 225p x 76mm shares = £171mm additional cap
rights (4 for 1) @ 30p x 1,216mm shares = £365mm additional cap
total cap/total shares= 1049mm/1520mm = 69p.
This is the theoretical value assuming 225p market value pre-rights. Hence 69p + 4 x (value of rights = 69p - 30p) gets you back to 225p.
I think the fact that the shares are trading at around 110p implies a gain of 60% per share since yesterday. You could sell your shares for 110p plus all of your rights for 4 x 70p (slight discount to theoretical) = 280p
I was looking to buy some shares this morning below close yesterday, but if my calculations are correct, price is way too high for me now.
Feel free to correct me if I'm wrong.....