Alibaba shot up from 73c to $1.23 in under a week back in March. In June it went from 79c to $1.26. Alibaba is a vast company, but despite that these were rises of 70% and 60% in close succession. THG could easily jump 50% in a day if the traders decide to give it a nudge.
I think the question is "how do you get the assets of Evraz group into a new company set up somewhere friendly". Evraz is prohibited from transferring its ownership of the Russian and NA subs, so a simple share for ************** is not possible.
The alternative is that Evraz challenge the sanctions in Court. I think they would win, based on the Bank Mellat case:
The supreme court ruled that the sanctions had been unlawful and that the government’s response had been “arbitrary and irrational”, and “disproportionate”.
I think the point about that is that if you think Evraz will be unsanctioned, then you dont have to consider alternatives - the ones you call nonsense (rude - cut it out please, there is no need for it). If Evraz is unsanctioned, everything goes back to normal, just as it was pre Feb.
If you think Evraz will never be unsanctioned, you need to consider alternative "nonsense" scenarios in order to come to some form of opinion on the paper cerificates.
I stated clearly at the beginning that if you think Evraz will be unsanctioned, there is no need to follow the conversation.
Oh dear oh dear, do you not ujderstand that we own shares in Evraz plc. The assets of Evraz plc are the shares it owns in the subsidiaries - in Russia and NA. These shares are prevented from being transfered to another company. The underlying assets may well not be subject to santions, but our ownership of the underlying assets is frozen. Dear God, please understand the problem correctly and then come up with some useful responses.
Fredstash you are very rude. And wrong. You cannot "move an entity abroad" easily. In fact tell me - how do you move an entity abroad?
You can sell your businesses to another entity that is abroad. But Evraz plc cannot because its assets are frozen.
Let's start with an assumptiion that Evraz will never be unsanctioned. You can make your own mind up about that. If you think Evraz will be unsanctioned, dont bother reading this.
So Evraz cannot possibly survive for 5/ 10/ 20 years as a sanctioned entity. It will have to do something. It cannot distribute any of the Russian or NA assets (= the subsidiaries) to its shareholders as its assets are frozen. But the group has to do something.
What to do. How about this: the subsidiaries could sell their businesses (the mines etc) to a new company, maybe Russian, maybe Indian, take your pick. This would be a way to get the businesses out from under the UK.
The businesses would have a low valuation, due to the geopolitical situation.
Who would own this company? Possibly existing shareholders of Evraz would be invited to invest in this company, especially the ones on Evraz's share register (being paper shareholders).
Of course existing shareholders of Evraz might not be invited to invest in the new company! But it is a potential scenario where being a paper shareholder might be beneficial.
Note - this would be an incredibly big project to undertake, and would take years to complete, and would probably be attacked by the UK government. Still, it's worth chucking into the discussion
And dont say "take private". That just means we owns shares in PLC as a private company that is still sanctioned, which is precisely the same situation we are ini now as we cant trade the shares anyway. We are effectively a private company anyway currently.
I cannot see any benefit of the paper shares. However I am writing these posts in order to clarify the arguments to myself, and get feedback/ arguments that sheds new light.
Putin is not going to give up the territory in Ukraine. He would be lambasted for the loss of life for no gain. Even a successor to Putin would be hard pushed simply to give back the territory they have seized as such a high price. Therefore sanctions will not be lifted in any kind of practical timeframe. My feeling is something will have to happen to Evraz as it cannot fullfil all it statutory obligations while under sanctions. It will have to be broken up in some way and removed from the UK. I do not think having shares in paper form or at your brokers will make a difference. But what I would say is that keeping your shares with your broker has no advantage either, as the dream scenario of Evraz PLC trading on LSE again through your broker almost certainly will not happen.
This is UNLESS Evraz challenge their sanctioning in Court. Which they are legally allowed to do, and I think they would win.
So I am undecided to be honest, but leaning towards taking papr, simply because the company have suggested it, and that might mean they are hatching a cunning plan...
I am aware of all the ways a company can restructure, but the problem is sanctions. Sanctions cover both the ownership of the subsidiaries (the assets of Evraz PLC) and on RA as a major shareholder. There is nothing meaningful Evraz PLC can do at this stage due to sanctions.
The subsidiaries are not sanctioned, but - for instance - for them to issue shares to us directly coiuld be a way to bypass PLC. However doing something like that would be circumventing sanctions. In any case, the UK government could simply extend sanctions in some way to stop UK shareholders getting benefits.
Nothing can be done unless there is a deal negotiated with the UK government, and it is debatable what the UK government actually want. They probably dont know themselves...
If you think Evraz sanctions will be lifted, then keep your shares where they are. In that scenario, things will simply revert to normal - Eraz will trade again, and be able to appoint directors/ share registrar/ auditors etc as normal, and it will go back to trading. The world goes back to how it was in January.
If you are dubious that the lunatics in Downing Street will lift sanctions on Evraz, then flip a coin as there is no way of knowing what the future holds. Paper certificates MIGHT give a benefit (but it is very difficult to envisage why - suggestions include Evraz can be in contact with you as an individual directly). On the other hand keeping your shares with your broker will have no benefit , as Evraz will never trade in the UK again and will not stay as it is.
My take is that the government are actively trying to force Evraz into a break up, with the aim of removing the NA operations from the (partial) ownership of the oligarchs. Sanctions will not be willingly lifted on the Russian part within the next 10 years. Evraz will resist break-up but eventually the UK government will find a way of forcing it into a distribution of the NA assets away from oligarch ownership, and the oligarchs and Russian assets will be banished from these shores. Quite what happens to us as PIs is anyone's guess.
You have to make your own mind up what will happen. However ideas that we can relist somewhere else are simply not tenable as PLC assets are frozen, and it is impossible to get away from that. There is no way to move PLC to another country - PLC is and always will be a UK incorporated entity under sanction. There is no way to move the subsidiaries out from under PLC into a new holding company in a friendly country - these are the PLCs assets and they are frozen. Something will have to happen, but it wont be as simple as "relist elsewhere".
A broker holds shares on your behalf. Under normal circumstances there is no upside to holding paper shares. In fact thery have to be traded "over the counter" which is a pain.
What benefit is there to convert paper? At this moment in time, absolutely none. If Evraz goes back to trading on LSE, having paper will only be a downside. So why bother?
Well, times are not normal. The government has thrown its weight around with Evraz, and for example, discouraged/ banned (Im not sure which) companies from providing services. Imagine they extended these rules to brokers for dealing with shares in Evraz for shareholders. For example, Evraz comes up with a restructuring plan to get out of the UK, that involves some form of share for **************. It would not be inconceivable for the UK government to make it difficult for brokers to process the share for **************.
On the other hand, if such a restructuring happened, it would probably be with the blessing of the UK government, by means of a licence that was issued to solve "the Evraz problem".
Nonetheless, you just dont know what the lunatics in Downing Street are going to do next. That is the only real reason to get paper shares - you're in slightly more control. Only slightly mind.
All other thoughts on this welcome.
For the avoidance of doubt, as some people get confused what "assets" PLC has, PLC's assets are its subsidiaries. In other words, in a liquidation, the shares in the subsidiaries would be distributed to the shareholders (after paying off bond holders).
The Minister for Trade can put a company into liquidation, for example if it cannot pay bond holders (for whatever reason, sanctions included). It may be the government plan to do that as a way to solve "the Evraz problem" (political)
Liquidation does NOT mean that the company is worthless. Liquidation means the assets are distributed to the shareholders after paying off the bond holders. The problem would be that the assets are frozen, so they could conceivably just sit with the liquidator forever. However I thin the US and Canadians would not like that - they want their side of the business to be "normal". So the government could give a licence to the liquidator to distribute the assets, probably not to the oligarchs however.
The company could challenge all this in court if it came to it. Although it is hampered by lack of UK legal representation (again because of sanctions). Nonetheless I am sure there is a way for that to be done should it be necessary
Free cashflow from operations was roughly £90m last year. Let's assume a reasonably modest multiple for valuation is 8. Let's be negative/ realisitc, and assume there will be nil net growth in the retail businesses over the next 8 years due to recession (followed by recovery). Let's also ignore any potential of Ingenuity. On that very modest outlook, you still get a valuation of £720m. With issued shares of 1.2bn, that is a "minimum" valuation of 60p. I do not see any reason for it going down to zero (ie going bust).