Member Info for TheMadStork

Spoiler alert! Do not read below unless you want the outcome spoiled!!!

They won't sue.

1) There's still a large overhang with a non-fixed number of shares due to close the short. In theory if Sandabel really batter it they could force the price a lot lower since I doubt they've done more than 35-40% of total so far. I don't think they *will* do that, but still.

2) Even if the damage is limited to 15m odd shares, AAOG still have no alternative source of funding at the moment. In the absence of full success on the drill, I doubt anyone is going to offer them anything like the cash they need at a fixed price. IMO anything but a hit on the Djeno, and they are stuck with the death spiral.

Of course if they *do* hit on the Djeno then there is no issue and everyone wins. That's a 1 in 4 bet though, and I'm happy to sit out until it actually happens.

1) Debtor Company draws down *x* amount of the convertible loan
2) Death Spiral Lender begins to forward sell into the market via a naked short position
3) DSL issues a conversion notice and receives discounted shares to the value of *x*, usually at the lowest closing bid of previous 3-5 trading days
4) DSL uses the conversion shares to close their short position and pockets the difference between their average forward sale price and the conversion price.

DSL takes almost zero risk and DC's share price is battered.

It feels like I've typed the same thing over and over again on many different shares. All death spiral agreements operate in the same way, and this one is no different. The idea that Sandobel signed a death spiral agreement that forbade shorting is laughable. They will not be forced to close, and AAOG will be forced to issue them the shares to close their short once Sandobel submit a conversion notice.

Assuming it is Sandabel forward selling, they are taking no risk. If it does shoot up (unlikely on just the top layers imo) then they can just convert at the previous days lows.

Ok yeah I see where the confusion has come in. I think it unlikely in the extreme that Sandobel would agree the conversion price on notice of drawdown and presumably without forward selling any. That would be *massively* risky. Far more likely is they've done what literally every other lender of this type does and have a variable price based on conversion date, which means they take almost zero risk.

I can definitely see the confusion though - 'Issue Date' in the agreement appears to be at least somewhat ambiguous.

The entire point of these CLN facilities is that the price is not fixed, thus locking in a -volume permitting- guaranteed profit for the lender.

No idea how they arrived at that figure. The terms of the facility are clear:

Should conversion occur, the conversion price for any Ordinary Shares to be issued to Sandabel under a conversion notice will be the ***lesser*** of (i) 125 per cent of the Initial Spot Price ("ISP") or (ii) the Market Share Price ("MSP") and the principal amount of the facility remaining undrawn shall be increased by the pre-conversion value of the loan notes that have been converted. ISP is defined as the closing mid-price of one trading day before the Issue Date and ***MSP is defined as the lowest closing bid price as for the three consecutive trading days ending on the day prior to the Issue Date.***

Emphasis mine.

I don't believe so.

Also correction to my previous post - they can convert at the lowest *closing* bid of the 3 days prior to conversion. I think this was 6.7 on Tuesday, so that's *currently* the potential conversion price. As I say, though, the price is not fixed and will be lower should the price drop.

Of course, on the flip side, if the drill does hit oil in the djeno and the price goes crazy, then Sandabel can still convert at 10.125 (ISP). They would lose money on shares forward sold below that, but would make huge amounts anyway, since 10.125 would be preumably a huge discount to the price on a hypothetical djeno hit.

Hope that makes sense.

The point is it is guaranteed profit for them. Say they convert £1m at 6.5p, giving them approx 15.4m shares. They will have already sold those shares at say an average of 7p, giving a total profit of (15.4m x 0.07) - 1m = c£78k profit for taking almost zero risk. Pretty sweet deal.

And of course, if the bid does drop lower and their conversion price is lower as a result, then they make even more money, again, almost totally risk free.

They can convert at the lowest bid of the 3 days prior to issuing the conversion notice. The price isn't fixed. If they issued the conversion notice right now, they could convert at 6.5 as the bid got down there on Tuesday, but if it drops lower then they can convert lower. Will be forward selling the shares as we speak and will pocket the difference between the average forward sale price and the conversion price. Easy win as long as there is buying to soak up the forward sales.

Surprised someone in the game as long as you doesn't know how death spirals operate.

Sandobel will firstly forward sell into the market up to a certain point and for a certain average price. They will then issue a conversion notice and receive shares at the lowest bid of the 3 trading days prior to issuing the notice. This price will obviously be lower than the average price they have received for forward selling the shares. They then close their short with the issued shares and pocket the difference between the conversion price and their forward sale price as profit.

Gauranteed profit as long as they have buyers in the market to forward sell to.

"Should conversion occur, the conversion price for any Ordinary Shares to be issued to Sandabel under a conversion notice will be the lesser of (i) 125 per cent of the Initial Spot Price ("ISP") or (ii) the Market Share Price ("MSP") and the principal amount of the facility remaining undrawn shall be increased by the pre-conversion value of the loan notes that have been converted. ISP is defined as the closing mid-price of one trading day before the Issue Date and MSP is defined as the lowest closing bid price as for the three consecutive trading days ending on the day prior to the Issue Date."

ISP is a meaningless ramp. The conversion price will be MSP, ie the lowest bid of 3 days prior to conversion. They will forward sell, smash the price and convert at the lows. Same as any other death spiral.

They could hardly admit in the RNS that they were at fault. But that's what happened, and they do not have a leg to stand on.

Really sorry for those who are holding and locked in here. Best case in my view is another broker is found and can raise money at not too much of a discount to the suspension price. Think that's pretty optimistic at this point though.

Incorrect. The company were asked to provide evidence that the issue with the drill was not known about while the funds were being raised. This would have been incredibly easy to do as all communication from the contractor should be in writing or on a recorded line. They failed to provide this evidence.

The company materially misled SVS and placees were sold the placing under false pretences and therefore entitled to a refund.

The fault is entirely with the TOM board here.

Yes they will definitely RNS as it will be a material change on the balance sheet. Would expect a temporary bounce in UKOG to follow, but not a trade to hold for too long I think.

The RNSs make it perfectly clear that the only option the company has is issuing more shares. That's why they are calling the EGM! The offers of debt finance they have had will all be death spiral convertible loans, which are technically debt but practically will wipe out existing holders.

They took shares instead of cash for their HH stake because UKOG don't have any cash and their shares are liquid. SOLO are liquidating their shares in order to realise their profit on the HH investment and provide funds for the main focus of their portfolio. It makes absolute and total sense.

They are selling an overvalued asset to spend on an undervalued one.

It makes absolutely perfect sense to sell now; they are making 50% profit on their investment in HH.

In a few years time UKOG will be bust or diluted to nothing.

Can't see how it can be a mistake as the figure is in the balance sheet also.

Payables £300k.

They have very little cash and would be stark raving mad not to raise pre drill. Not saying it is imminent, but they will absolutely be raising as much as they can possibly get away with pre drill. Would be irresponsible not to.