Member Info for TakingMyTime

There's been some discussion about the timing of Gervaise Heddle's options exercise. The reasoning is almost certainly nothing secretive and simply an astute market participant acting based on the confluence of Australian tax law and market forces.

HE DIDN'T HAVE TO DO IT NOW
First, let's dispose of "GH had to do it now." Yes, sometimes options expire on departure from a company, but if so, GH would have exercised before leaving. This was surely negotiated and GH has kept all of his vested options, or he would have exercised them before his employment terminated. That's not really debatable. (I suspect he also kept the options that were to vest in the autumn, but the vesting was voluntarily deferred. We'll find out later.)

Was GH allowed to keep his options but given a limited time to exercise? Possibly, but if so, that would probably apply to all of his options, and >he still has vested options which haven't been exercised<. So the likelihood that he had to exercise now is very, very low, IMO. He's done it now voluntarily, almost certainly.

AUSSIE TAX
I understand that tax is due on the difference between the exercise price and the market price at the time of exercise. So if market price were 18p and exercise price were 3p, he would pay tax on the difference, 15p per share. The higher the market price, the more tax.

When he sells his shares, he will pay capital gains tax on the additional gains. So in our example above, if he sells those shares at say 50p, he would pay capital gains tax on 32p (50-18) -- but capital gains tax is very favourable by comparison. So Aussie tax makes it better to exercise the options when the price is low, not when it is high.

MARKET FACTOR
Anyone with a brain knew that the new ISA year was likely to bring new PI money into GGP, which would push the SP higher, and that phenomenon will probably last for a few weeks -- and more results are coming. Anyone with a brain can also see that there's a significant chance, with vaccine deployment and summer coming, that the economy and the markets may do well. So anyone with a brain would know that there's a significant chance that the SP will never again be as low as it was late last week.

If market forces are going to push the SP higher, then the very best time (from a tax perspective) for GH to exercise his options was last week. And that's when he did. Does anyone think he's not smart enough to figure that out, and to have advisors to remind him if he was too busy to notice?

There's nothing secretive, nothing conspiratorial about the timing. The answer is in plain sight if you put together the facts that most of us already knew.

Wow. I made a simple post explaining why GH wasn't named in the RNS and it got deleted? That's totally bizarre.

Well, that's dead. No way GH exercises options now (and sells a few shares at recent prices to pay for them) if he thinks there's an imminent takeover. He'd just wait and get the full takeover price for all his shares and all his options.

If we are about to be taken over, no one told Gervaise.

@mmm "From my understanding companies include this and then have a better chance to block a hostile takeover."

Yes, although it's not enough to move the needle significantly. But just as a for-instance, suppose Barrick (since they are among the more aggressive miners in M&A terms) decides to make a move on GGP, and offers something like 40p. Suppose the board thinks that isn't enough and recommends against accepting it. Will 50.1% of shareholders accept it anyway? Maybe. But suppose the board turns around and issues another 5% to NCM at, say, 30p.

That's 5% that certainly isn't going to Barrick. It now means to get control, Barrick would have to get approximately 53% of the previously outstanding shares, rather than 50.1%. That's harder, obviously, but hardly rules it out.

So yes, it can be used defensively against a hostile takeover, but 5% may not be enough to swing the decision. And that's ok with me. I don't want the board to block a hostile takeover just because it means they lose their jobs. I want there to be a compelling case for blocking it, because the takeover offer is clearly too low. In that case, they shouldn't need the 5% but it doesn't hurt to have it if it looks like a close-run thing.

If the board could do 20-25%, they could then perhaps block even a good takeover offer. That's not to our benefit.

I am happy with 10%. I'm even happier with it split up into two 5% chunks for different purposes, though I'd have supported a general 10%. I don't think the board needs more than 10% -- if they want more than that they should come to the shareholders and make the case that it is to our benefit, rather than having a blanket authorisation. I don't want to tie their hands, I want them to have some tools to hand, but I also don't want to give them carte blanche. I think the proposed 5/5 authorisation is a nice middle ground between the two extremes.

That is just my opinion, of course. Others may differ.

As always, there's confusion. I'll try to sort it out in layman's terms.

IS THIS ABOUT A RIGHTS ISSUE OR A PLACING?
This is not about a rights issue. Resolution 4 at the AGM, which was passed, allowed a rights issue.

This might be about an external placing but it doesn't have to be. This just gives the BOD the right to issue shares. They can issue them to a drilling company to pay for drilling. They can issue them to employees in lieu of cash salaries. They can issue them to the shareholders of another company as full or part payment in an acquisition of part or all of the other company. Or they can issue them to an outside investor (a corporation like Newcrest, an institutional investor, or a very wealthy individual) for cold, hard cash.

DOES THIS MEAN THERE WON'T BE A RIGHTS ISSUE?
No. It means if they have a good reason to issue shares at these levels, they can do so quickly without a rights issue or consulting with shareholders.

HOW MUCH CAN THEY ISSUE?
Up to 5% for capital expenses or an acquisition, PLUS up to 5% for general expenses.

WILL THEY USE THIS RIGHT?
They had this right last year and used it to issue some share options. Chances are, they will use it on a small scale. Whether they use it on a larger scale probably depends on the opportunities that arise. The RNS states there is no definite intent to use it at this point in time but obviously, they can foresee situations where it would be useful, and it is something they want in their toolbox.

HOW MUCH COULD IT HURT THE SHARE PRICE?
Well, IF THE AUTHORITY IS USED it's dilution, but it is extremely unlikely to be naked dilution. They aren't going to just give the shares away, they will be getting something for them -- drilling, cash, an acquisition, whatever. So whatever it is should either increase the value of the company or (if used for something like drilling) have the potential to increase the value of the company. So it is unlikely to be significantly negative to the SP -- but it depends on how it is used.

If the full 10% is used, it means that your shares will constitute a reduced percentage of the ownership of the company, by 10%. If a placing for 10% were done and it did absolutely nothing for the value of the company (no acquisition, no cash, nothing), it would reduce the theoretical value of your shares by 10%. That is an extremely unlikely scenario, of course. More likely is it would increase the value of the company between 5-10% and so would have a negligible effect on the value of your shares.

But it's worth remembering that we've just seen the SP drop by 50% in recent weeks, so a potential 2-3% impact from a placing, if it were to happen, rather pales in significance.

WILL TMT SUPPORT THIS?
Yes. I believe it gives the BOD valuable flexibility. Resolution 5 had my support in December and I support this. I trust them enough to trust that they will only do this if it adds significant enough value to justify it.

@Holla "Yes juri JV and then GH leaving probably were the time to take some off the table or all."

Could have taken my own advice. I warned Mush, who was talking about needing to sell some for his house, that the MRE was likely to come in below the hype and could hit SP. That was the time to take some off the table, just before the MRE, if there ever was a time.

But I have no regrets. This will go much, much higher, and I can wait.

I don't know if GH was unhappy or unwell or just tired in that interview. But being unhappy is not necessarily a bad thing. If he was jumping up and down and saying, "I'm so glad to be out of here," that might be concerning. He had a great run, it would hardly be surprising if he were down about it even if he thought the prospects were great and that this was the right decision.

I put no weight on his demeanour during that interview.

Paddy, nothing I can do except say I care. Obviously I'm not alone. It's not much but in my time I found it was something for which to be grateful, and I'm sure you will, too. All the best to you.

@1.Armani, certainly in my view this is a buying opportunity for GGP, I may actually move some funds from here to there, very tempting.

@Dunale, I think you are mistaken on that. There is no rule anywhere that says the board has to collectively be the largest shareholder, and in many cases they are not close to being so. And it is very rare that collectively they would hold the majority of shares.

It's always a nice signal when a director puts some of his/her own hard-earned into the shares of the company.

@Rogue
"I think the cons outweigh the pros at present. I think we will see a steady (then possibly more dramatic) correction in the next few months."

Thanks for the reasonable list of pros and cons. I disagree with your assessment of which outweighs the other, and if we stay at this level much longer I may add more. But then, I'm prepared to hold this for another 5-10 years if it takes that long to hit my target price. I'm pretty sure it won't take all that long, though.

But I can respect a contrary view when the basis for it is given.

@Tymers
"Posters declared they had set up a Telegram group last year by invite only."

To be fair, the invitation to that group has been posted on this forum repeatedly, and in other places. Anyone who wanted to join could. The difference is that you can get kicked out of that group for cross-ramping or blatant deramping.

"By invite only" suggests limited membership. Last I checked (I don't check or post there very often) it's over 1000 members.

@Tymers

Two points:
"Secondly SD is our acting C E.O. and yes as permanent as GH was."
1. "Acting CEO" has a very clear meaning in the financial world, and one which does not apply to SD. Having read what you've said further, I suggest in future you use "Current CEO" instead.

"As stated it is important to have SD communicatte with us not GH."
2. I'd like to tweak your wording slightly:
"As stated it is important to have SD communicatte with us not Paddy."
"As stated it is important to have SD communicatte with us not Bamps."
"As stated it is important to have SD communicatte with us not Tymers." :)

Personally, I'm happy for all these communications, even if they don't have the same importance and weight as communications from the CEO. In GH's case, for the next month or two at least, I'd put more weight on his communications than any other private investor, or for that matter on communications from our brokers. He still can't divulge inside info but now he probably can be a little more liberal in dropping hints than SD can.

That 223p we paid a couple weeks ago is looking pretty good....

Rarely post here anymore, the constant arguments with the derampers ruined the board.

Just to comment this time that the bond terms are revealing. Subscription levels very high and rates are very, very good. There's no way the big money investors would be loaning money at less than 3% for 4 years, and less than 4% for 8 years, to a company that they think is at any risk of failing.

I won't be surprised to see the SP go higher tomorrow. That's a huge vote of confidence in the company by the big institutional bond investors.

So what do you do with an outlier? You look at their reasoning, and see if it makes sense to you. I'd say their logic is sound, but you have to cut through it to the underlying assumptions.

Ultimately, their key assumption is that the upside for housebuilders is about 15%. If I agreed with them on that assumption, I'd probably be getting out, because everyone knows there's a downside risk, too.

Personally, I believe the housebuilding sector has much higher upside than that. My reasons are four-fold: 1) The sector was held back by Brexit fears which have proven to be overblown. 2) The sector will be bolstered by low interest rates and other stimulus used to rebuild the economy. 3) The sector will be helped by direct government action because no government can afford to lose the votes of millions of homeowners, so they have to keep the housing market supported. 4) There's still a housing shortage, and supply/demand factors will keep driving this.

The third and fourth are also particularly positive for PSN because they function largely in the lower-priced end of the market. They sell a lot of homes to first time buyers, and to keep the market supported, the government has to keep encouraging first timers into the market. So in my view, their logic may be sound but their underlying assumption about the sector as a whole is flawed, and perhaps even more flawed for PSN than for some other builders.

So I'm not particularly bothered by their changed outlook. They've given their reasons and I don't agree with them. The future will tell whether I'm wrong or not but I'm still holding at this price and would consider buying more if I had cash to invest right now.

"exsatex>>>>>>>>>>>>>>>>>>>>>>WHAT ?"

The filter capability here is quite useful. I tried reporting every time he broke one of the rules and they deleted post after post but somehow they've never banned him. One thing is certain, he won't say anything to help you figure out whether this investment is likely to do well for you or not.

@jack, thanks, I'll do some looking.

@jack
"It's not reasonable to dismiss his comments as ill-informed or speculation on a par with ordinary investors. It's more reasonable to assume he knows what he's talking about and he's probably right."

Or, assume he's trying to influence PIs to buy/hold on the expectation of a takeover because that will boost the SP of his own investment....

Call me cynical if you will. But if I'm trying to match up corporate behaviour with someone's prediction and they don't match, I'm not averse to giving a thought to the predictor's own interests and possible motivations. Even someone highly respected like Steve T.

Putting aside all the arguing, just to say, having read and researched the mechanics of GDXJ pretty thoroughly before throwing money at GGP to take advantage of the first entry and the first rebalancing, I think I understand it pretty well.

And I concur with jdt1990 and AM90.

And it's not rocket science. It takes some careful reading to get every detail right but if you read it, you'll get the general idea. You don't have to trust anyone, you can read it yourself. If you do, you'll find out who has researched it and who is just expressing an opinion but doesn't have a clue. There's really no need to argue the point here, everyone can just go look....

Hi, zoros, thanks for the comment. Let me just compare the GGP/NCM situation with what you outlined:

"I think it's quite common for majors to JV or farm in with minnows during the early stages."
Correct, and our scenario matches entirely.

"I think they see minnows as a subsidiary to themselves, an additional department covering discoveries/exploration."
No evidence whether NCM views GGP this way or not. Could be, maybe not.

"These minnows do all the paperwork, admin, fieldwork early stage drilling etc...and they are paid insignificant amounts to cover their expenses (IE: $50m for GGP's efforst up to and including the FS)."
Except that NCM has been doing all this stuff for a while now, right?

"IF sufficient progress is made by these minnows, then the major may invest a little more, getting them to do more 'due dilligence' and eventually..provided there is a discovery...bang! They buy them off."
Here's where your comparison breaks down. There IS a discovery, and has been for a while. And not only has there been one, they know it is economical to mine, and in fact, probably huge. But still not buyout.

So here's what I think. If the scenario you describe were reality, when would NCM be most likely to make their move?
1. Last summer when the SP was languishing at 12p and they probably could have bought the whole thing for 20-25p, maybe 30p.
2. When the MRE came out and the SP took a hit because PIs were disappointed.
3. Anytime in the last month or so when many PIs would say, "I'll have that" if they offered 40p.

They haven't done it. Why do we think they'll do it when the SP is 50 after a PFS?