Lonmin Share Discussion Threads

[kojak78] 21/11/2015 12:14

Once again, once the share price falls below 1p the RI will have failed for private investors as then it won't make sense to use rights. Just buy the shares. But with the possibility of employing 46x as much capital via using rights vs. buying the shares there will be enough pressure to hold this above 1p.

A fall below 1p is only possible if no one wants to employ more capital, let's say in a scenario where the platinum price were to fall 15% overnight. In that case underwriters will step in and a takeover via PIC will be a possibility.

As long as the rights have any value that indicates demand for new shares which means they are likely to be taken and no underwriters needed. Lapsing rights? I doubt it will be a huge amount.

[typo56] 21/11/2015 12:08

dealy: "because you can't get margin on the Nil paid rights and there are other restrictions such as either a) exercising them or b) selling them in a limited time period."

Fair enough I suppose if you are trading on margin, although with a stock this volatile I'd have thought you'd need to have the funds in reserve to fully fund anyway.

Otherwise, if someone wanted to buy into LMI yesterday doing so via the LMIN nil paids was a lot cheaper. e.g. LMIN was only abouy 0.2p (1.2p paid up) when LMI was 1.6p. i.e. 25% cheaper. As others have said, the arb seemed too good to be true. Probably why IG didn't allow further shorting of LMI after about 10am!, although others did.

On advantage of buying via LMIN at 0.1p is your downside risk is limited to 0.1p, without being stopped out. If you put a 0.1p stop on LMI longed at 1.26p you could be stopped out at 1.16p and then miss out on the bounce.

[careful] 21/11/2015 12:07

So many will be bailing out and selling their rights, tail swallowing and the like.
It is possible for the rights price to fall to almost zero.

[typo56] 21/11/2015 11:46

elvisrocks: "Typo56, just looking back through some posst. Your Post 6263 is not correct that 1.5p LMI equivalent to 24.5p. It would have cost holders 56p per share (10p + 46p) to end up with 47 shares last night, not 46p to end up with 47 shares."

Sorry, my post 6263 was obviously poorly phrased. Perhaps it should have ended "it will cost holders last night AN ADDITIONAL 46p per share to end up with 47 shares".

However, I think my reverse TERP sums are correct. That is:

LMI[cum rights] = 47*LMI[ex-rights]-46

Which means an ex-rights price of 1.5p is equivalent to a cum-rights price of 24.5p.

It is simply a reversal of the TERP formula which I think you agree on:

LMI[ex-rights] = (46+LMI[cum-rights])/47

The above gives an ex-rights price of 1.19p for a cum-rights price of 10p and it gives an ex-rights price of 1.5p for a cum-rights price of 24.5p.

[m w] 21/11/2015 11:44

well done declan2 too many misleading posters on here

[m w] 21/11/2015 11:41

I have no doubt this will drop below 1p (rights issue price) as pog fell below 5p (rights issue price) and Nil Paid will be worthless

[declan2] 21/11/2015 11:39

I sold my nil paid yesterday. Disastrous share.

[m w] 21/11/2015 11:35

hxxp://www.thefiringroom.com/mining/petropavlovsk-plc-rights-issue-explained-why-are-the-shares-down-65-and-what-are-the-nil-paid-rights-worth/

[chrisbr777] 21/11/2015 11:32

When I say the rights are pretty much worthless - it is in context of where LONMIN is at the moment. We all agree that the rights should be valued at 0.19. Where are they now? 0.10. Yet this 0.10 on its own is irrelevant on a stand alone basis. Even the current market cap of Lonmin PRE SHARE ISSUE reflects that these rights are worthless on a stand alone basis. They are a contributing factor to the GBP 34m total valuation of the company as at this date. Rather, the rights should be seen in the context of the 1p share which will have to be bought if you are to unlock any further value. The only time the rights have any REAL value is if LONMIN share spikes in the next few days or fortnight, and this will be due to market fundamentals. Just as an aside note - it would be quite humourous if the share price (LMI)drops below 1p - will the rights offer be taken up? Rather will you not buy post 10 Dec at the lower price? Interesting times ahead.

[elvisrocks] 21/11/2015 11:28

careful, what do you make of all this 0.10p per right nonsense yesterday?
Shorters at it?

[elvisrocks] 21/11/2015 11:27

mw, really?

Rights went up from 5p to 17p during the 3 week or so subscription period?

[m w] 21/11/2015 11:22

the reason pog share price went up to 17p was because of a bid during the rights process

[careful] 21/11/2015 11:18

MW if everyone buys at below 1p then it will go back up above 1p.
why bother, it is all too messy. Just take up your full rights, then stand back and see if Lonmin can survive and prosper.

Lonmin is the dog of my portfolio this year, there is always at least one.
Now I will commit further funds in the hope they may come good.
but it is very high risk.

Tesco, RBS, Northern Rock, Glencore what next will punish us.
Something we do not anticipate is lurking no doubt.

[elvisrocks] 21/11/2015 11:16

nw re Post 6477. Can you confirm the pattern of what did happen on the trading of the POG rights during the subscription period, there seems a lot of confusion here.

My best understanding was there were issued at 5p, and traded between 4.5p-5.5p and eventually settled around the 5p mark.

[elvisrocks] 21/11/2015 11:13

Kirk re Post 6476.

You are still confusing the 46:1 multiple when you say "the rights are currently worth 1.1p as opposed to 1.27p however you will have to cough up the money on the 10th Dec"

PS: I agree with your Post 6474 by the way "Let's just get this straight the rights WILL always be worth something if LMI is trading above 1p ignoring the time contingency up until the 10thdec!"

[elvisrocks] 21/11/2015 11:11

Chris re Post 6460

"the rights are pretty much worthless. whether you buy for 0.1p or 0.2p is almost irrelevant. This is not a 100% premium. You need to see it as 1.1p versus 1.2p".

Not so, my calculations have explained otherwise and also there is huge shorting going on as careful describes. Macquarie put a value on the right of 0.40p v 0.10p yesterday.

Kirk re Post 6461.

"Chris is right regarding the rights calculation as the price is 0.01p against 1p Rights prices so 1.01p the valuation of the company then needs to be added at 1.27p and then the new shares on the 10th".

Chris is not right. Firstly it's 1.10p not 1.01p, and secondly the 1.01p won't get added to the 1.27p. They have now been sub divided - "46 of the 1.10p" (your 1.01p) but only "1 of the 1.27p"

Can I therefore trust your comments on POG? "rights price of 5p then shot up to 18-19p before the rights were paid. My mistake not 22p" or "I think 2-4p rise possible pre the 10th".

Your decimalisation is all over the place. I prefer to go with the Macquarie option and Lazy who said POG traded its rights 0.5p or so above / below the 5p issue price during the subscription period.

[m w] 21/11/2015 11:06

I think this will go the same way as the petropavlovsk rights issue, I expect the shares to drop to . 9 p in the next few days and then buy!!

[kirk 6] 21/11/2015 10:59

The rights are currently worth 1.1p as opposed to 1.27p however you will have to cough up the money on the 10thdec

[elvisrocks] 21/11/2015 10:59

Chrisbr777. I'm pleased we are a little closer to the same page now.

Of course you could pickup lots of shares in the last few days, some will have, some like Old Mutual offloaded (to someone else behind the scenes probably) but getting the whole company, you have to have 30% of the shares and then make an offer acceptable to the directors. Big figure no doubt, but some are contemplating it with PIC assistance.

If you want to know further where I am coming from, look at Posts 5636 and 5638, when I tried to estimate what old equity was worth, based on numbers Graham pulled from the Prospectus after the 46:1 was announced. I came back to roughly 25p per share "in old money and in old number of 586m shares" (what Barclays / Investec are saying) what Lonmin will be worth after all the RI.

That "old money" moved down to 10p on Thursday, and effectively to 5p yesterday when the rights dropped by 50% from 0.19p TERP to 0.10p.

[kirk 6] 21/11/2015 10:58

Let's just get this straight the rights WILL always be worth something if LMI is trading above 1p ignoring the time contingency up until the 10thdec!

[chrisbr777] 21/11/2015 10:50

"You were short at 10.5p hoping the company would collapse." - not necessarily hoping it would collapse. But fully ready for a collapse if it came. I also looked at the possibility of a) government bailout or b) debt holder bailout or extension of terms. Any of the three scenarios about would have led to a nice bounce.

[careful] 21/11/2015 10:48

I think the commodities themselves, from oil to copper and platinum are being shorted also.
By big players, I am talking conspiracy theory.
It suits the American economy on balance.

[careful] 21/11/2015 10:44

You were short at 10.5p hoping the company would collapse.
There are far too many people with a vested interest in collapse and failure.
Clinton has hinted she would look at these things, I hope so.

I would hate to have a delicate heart operation if the surgeon and the nurses would benefit financially from my death.

shorting should be restricted and regulated.

[chrisbr777] 21/11/2015 10:42

I agree with you on this statement -- ""You "could" have picked up the whole of Lonmin for £60m on Wednesday according to the market price, never going to happen of course."" -- There would never have been huge volumes available for Offer. The primary shareholders could not afford to offload at 10p. It also would have been impossible to offload without crashing price further. Hence some of the under the counter deals I read about earlier on the thread.

[chrisbr777] 21/11/2015 10:29

The "YES" vote effectively guaranteed a recapitalisation of an additional +/-$400m. Well done to them. I was in the market hoping for a "NO" vote where the book value of the company exceeded the market cap by almost a factor of 20. If it failed and they 'shut shop' I would have come away with a good capital gain eventually. After the "NO" vote I sold the rest of my holdings. Fortunately I only got in at about 10.5p. Now I understand why the larger shareholders had to vote YES. They themselves did not get in at 10.5p but rather MUCH higher prices. For them to totally write off their investments by voting NO (as they probably bought in at much higher than book value of company at 30 September 2015). For them to get any recovery against prior capital losses they had to inject the additional equity. And hope for fundamentals in the market to change. Anyway, this is how I read the situation. Is LONMIN a good investment going forward? Possibly. There is definitely upside potential (not as great as my upside at 10.5p on a NO vote). So it depends on appetite for risk. I do however see a worsening of platinum prices (circa $850 vs $950) compared to when the 1p price was announced. And this could be depressing current rights pricing below predicted levels. Once again, my opinion only.