Interesting, Nige. Wonder why that is. Do you think it is because the market is putting a premium on cash in hand, and so paying more for PSN right now?
I personally put a significant premium on cash right now. Not because I think any of the main builders will go bust. But I do think small builders may go bust and the one with cash on hand may be in position to step in as the hero and save jobs, etc. So the cash may mean getting some good assets relatively inexpensively AND some good press.
And, if that doesn't materialise, we may see land at depressed prices in the near term, and having the cash allows the land bank to be built at prices that will be well below the long-term average.
So I don't just see the cash as a defensive asset to protect the company's existence, but also as potentially a strategic tool for growth.
I don't know how you could reflect that in your model, though. It's hard to say exactly what the cash may be worth on those terms. It could be largely irrelevant (maybe no assets will be acquired after all) or it could be hugely beneficial. I'm willing to pay more for a company that has it, but deciding how much it should factor in is hard to do.
Anyway, something you might want to hold in your thinking. Thanks for the posting, it's very interesting.
"Not seen any RNS relating to the massive buys yesterday. Wonder if it’s an investment company topping up or something bigger?"
Probably Warren Buffett taking advantage of bargain prices after talking it down.
In addition to the others already listed, Marlborough holds GGP in their Nano Cap Growth fund.
It is accurate that institutional investor involvement is limited but that is always true with AIM. The fact that it exists at all shoots down the whole argument. If you want to argue there are risks on AIM, I suspect everyone here will applaud your brilliant insight and then find something else worth reading. But at least find out if there are institutional investors before claiming there aren't and building an argument on the error.
"Why are so many people fixated on a transaction all executives with options do at a point that best suits their own tax position!!! Leave GH and move on!"
Because most executives would exercise the options that expire sooner at a lower price, rather than the later expiring ones at a higher price. GH did the opposite. And the tax advantage of exercising the later expiring ones, even if the rules in Oz are the same as here, does not outweigh the higher price GH has to pay for them.
But that's my last word on it, even though there are things that have not been answered, because it's obvious this board in the main has no desire to explore it further. I'll do my own research.
"My 5 year old niece is better at joining dots than some of the hand-wringers on this board."
I'll try to explain this simply.
A. There is no hand-wringing.
B. No one has expressed any worries about the transaction. I didn't see any, anyway.
That is not the reason we are discussing it. The reasons:
1. Unless there's a tax reason, there's no obvious reason why he exercised that particular option.
2. Maybe I'm slow but the tax reason isn't particularly obvious to me.
3. There MIGHT be a reason for him to exercise that particular option if he thinks a hostile buyout attempt might be in the works and he wants a greater say.
4. If that is what is going on I would obviously like to increase our investment here.
It's not "worry". It's wondering if it is a clue to an opportunity I wouldn't want to miss. Obviously that's not the way you approach your investing, and that's fine. When I (or in this case my wife) invest in anything, I want to start learning absolutely everything I can about everything about it, and everything that happens. So far, it works pretty well for me. I realise not everyone is that way. Maybe there's a touch of OCD in me.
For me, I'm going to be looking into Oz tax rules on director share options and see if it makes more sense to me then. If it doesn't, I'll be thinking it was strategic rather than financial or tax-related, and will probably buy more shares now, rather than later, so I don't miss out on what might be coming soon.
Unless there's a second wave of the virus that keeps Primark shut longer. In which case the upward move may take longer / be slower.
But it's still coming. Just don't want anyone to be discouraged if it takes longer than expected, we're still on a winner here.
"Merely a statement of some of the facts:"
All of those facts were present previously, yet we have either "a good old-fashioned pump" or something else going on. Those facts don't really shed any light on which it is, do they?
I'm all for him making lots more money than he already has! I suspect everyone here is. It's just that the way he did it seems strange, both in the timing of his share sell to finance it and the options he chose to exercise.
If he did it that way for tax purposes, then it's of no interest to us. If it was for strategic purposes, it could mean there's news coming!
There is no obvious reason why he exercised the option that expires next year, rather than the one that expires this year. If he had to sell shares to finance it, there is no obvious reason that he sold them now rather than a year from now when they will presumably be worth more.
When there is no obvious reason, there may be other reasons that are clues to the future. Because I think we can be pretty sure that he's not a stupid man, right? So there is SOME reason somewhere....
"I can’t see that he wants more votes as if there was a deal that he wanted to vote on he could immediately exercise all his options on one day, pay the premia and all done."
Well, one would think so. Unless he doesn't have the cash to do that and needs to sell some shares to do it. If that's the case, then he'd be selling shares to raise cash at a tricky time, I guess. But the price would presumably be better, and he'd just do it after the announcement was made.
"Maybe he is freeing up some space to give himself some more options?"
That would be interesting, for sure. Is there some kind of limitation on how many options he can have? There wouldn't normally be, I don't think. Admittedly not an expert on that kind of thing.
I'm guessing it is tax (not UK tax). Perhaps in Oz options are taxed at the point of exercise on the difference between market price and exercise price. If so, you would want to exercise when the market price is lower, potentially, if you expected market price to be going up. If someone is interested enough to research Oz tax rules on directors' equity options I promise to read what you post, LOL.
"Unless you have no shares and just want to exercise the options to sell the shares that have been exercised, there NO economic benefit to exercising early. (Assuming no weird local tax issues).
I am not an options guru really, but on this board I probably am."
So, why then do you think he exercised early? Seems like it's either weird local tax issues (in which case it is boring and has little import to us) or more votes. Struggling to come up with any other reason.
"The last thing any country wants is a second wave and this virus is here to stay until a vaccine is found"
And if a vaccine is never found? Are you saying people are going to do this social distancing forever? Sorry, that's not realistic. Human nature doesn't work that way. We'll do that which is unnatural for a while in emergencies if we believe it is necessary. It won't happen permanently. If it means life spans return to a more normal measure, given the history of humanity, then that is what happens. People will adjust, get used to it, life will go on.
How long that will take I don't know but things are already breaking down all over the world. People have had too much freedom to give it up lightly.
"So no tax paid."
Look at note 16, page 52. It tells you the method that was used to value the options (Black-Scholes is pretty standard for that purpose). The options were treated as a company expense. Not an expert on Australian income tax, but most places around the world, company share options granted to employees are taxable.
Otherwise, a company like say BP could reduce every mid-level manager's salary by £12K and give them share options at £0.01 per share worth £12K. The manager turns around and exercises the option, sells the shares for £12K, and has £12K of tax-free capital gains. No income tax, no national insurance, everyone is happy (except HMRC and the Chancellor who won't have any money to play with). Of course, then everyone starts doing it, and the government is even more broke than they are.
So options are almost always taxable using an accepted option valuation model. Like I said, don't know about Australia but would be shocking if they aren't.
"100% - he could have converted these in a couple of months when the SP is a lot higher and he would have had to sell a lot less to cover the costs - it's just like his director buy when we dropped last month, he is supremely confident where this is going and saying that to the MM's and the market - IMHO."
I'm not sure that's the way to look at it. If he's supremely confident, then he should wait until the SP is higher.
So why didn't he? I can think of maybe three possible reasons, there may be others.
1. He isn't confident about the interim share price. He may think this is the best it is likely to be for a while, or at least that there's a risk that we'll see prices drop for a while. That's a possibility, of course. The gold isn't coming out of the ground for a while. Maybe he saw short/medium term risk to the share price -- whilst obviously still having long-term belief. But this may have simply been reducing his risks by taking profit on some of his shares.
2. He has to be careful about insider trading so he can't sell when there's news he knows that hasn't been announced. So he had to plan his sale around the news schedule. But this was for options expiring a year from now, I'm sure he'd have had a chance in that time frame.
3. The options all vest on a change of control event -- but not when one is proposed. If he's concerned about a hostile takeover, the options wouldn't get a vote on that question, the shares would. Perhaps he wanted to convert those options to voting shares to increase his ability to fight off a possible hostile takeover.
Might be other reasons, those are the only ones I can think of. I think the SP is going higher in the short/medium term, but I suppose if I had as many shares as he has, I might be willing to reduce my risk by taking some profits now. He has a good few more profits to take in future if he wants, he's unlikely to regret this one too much even if the shares go to a pound, or ten pounds. How rich do you have to be?
"I’d be surprised if they did lapse. He has 400,000 from his sale at9.25 p so won’t be surprised to see him spend another 78400 for 28 mill before they expire. It is after all part of his salary"
Exactly. He's paid tax when those options were issued at value at the time, too.
If he lets them lapse I'd think he's not a very good businessman.
@Plappers "The way he stuttered through that, did give me the impression that he already had a lender teed up on the debt finance side of things."
I wondered that, too. Almost as if he said he knew he could get debt finance and then realised he shouldn't say that and backtracked to make it sound not quite so certain. I'd guess nothing is agreed but that there have been very positive conversations and he pretty much knows it will be there.
Who wouldn't be willing to lend the money? There have to be multiple institutions looking at it and saying, once the MRE comes out, yeah, we'll put up money for that. If the MRE says what we think it will, it's going to be pretty secure lending.
Of course, it's possible that was all a bluff and he intends to sell to Newcrest. But it didn't strike me that way. Reading between the lines and guessing wildly, I think the plan is this:
1. If the MRE is not as good as currently expected, probably sell out to NC and start again at Scally.
2. If it is very good or great, as expected, agree the 5% with NC and use that and debt financing to go ahead and mine. Perhaps also use debt financing to start at Scally, or perhaps do another JV with NC there.
If NC comes in with an offer you can't refuse, either for Hav or for GGP in whole, that obviously changes the plan. I also think they want the SP higher so that NC knows that "an offer you can't refuse" is a whole gold mine full of money.