Lonmin Share Discussion Threads

[elvisrocks] 24/11/2015 09:20

Careful, you're absolutely correct, there are "dirty forces" at work here, I've just seen two trades go through seconds apart with >10% price difference.

What we mustn't forget in all this is there looks there is c.1% of the rights traded each day, so that's c. 10% over the subscription period, but much of this will be traders washing over and over again. Plus with PIC and others wanting 25-30% of underwriting they probably won't get and likelihood of low lapsed shares, "demand" for these rights is "high".

Would you agree?

[careful] 24/11/2015 08:16

12% buy/sell spread on nil paid.
we are being encouraged to sell them cheap, but not to buy at all.
what are they up to?

[chrisbr777] 24/11/2015 08:04

If the rights are extremely cheap, then buy as many as you can. I am not saying you are right or wrong. In terms of 1.40p valuation -- lets stress test this. The company had 586m shares at 10p just prior to Rights issue. This would value Lonmin at GBP 58.6m - The shareholders will inject $407m (less fess = approx. $370m injection). This injection is worth GBP 244m. The combined value should "theoretically" be GBP 302.6m. At this point there will be 27.5 Billion shares in issue. Dividing this out comes to a price of 1.10p per share. What has fundamentally changed in the market to give an incremental valuation of 1.40p? Fundamentals haven't changed for the positive. In fact they have gone negative. Platinum price is over US$ 100 weaker between the announcement and now. But lets not factor this in as it could make things look a lot worse. Rather lets take off at least US$20m per month x 2 months of operating losses from announcement to when consolidation happens. This $40m equates to GBP26.4m off the above valuation. This gives a new valuation of GBP276.2m and a share price of ----- 1.00p

[elvisrocks] 24/11/2015 07:41

Kirk, I think you need to be an experienced trader to trade extremely volatile rights in this window period. Experienced traders will know how to manage their risks here, the less sophisticated less so. I agree with you though the rights offer huge value at these prices.

[elvisrocks] 24/11/2015 07:38

Who is to say that the LMIN will be 1.00p in 2 weeks time? Macquarie think a right is worth 0.40p, so LMIN will be 1.40 by then and LMI 1.40 by then if the arbitrage narrows to zero. Or if you follow TERP then 1.19 LMIN and 1.19 LMI which is what the TERP was the day Lonmin went ex rights last week.

[kirk 6] 24/11/2015 07:36

But Chris you can trade in and out of the rights any time you like they are valued extremely cheap in Comparison

[chrisbr777] 24/11/2015 07:32

The rights are basically without value at this stage. Paying 1.07p for something that will be valued at 1.00p in 2 weeks makes no sense. On an aside note - looking at the bid offer spread on Platinum this morning - $839 $844 - not looking good at all. This cannot be good even for the 1p valuation in 2 weeks. Lonmin will be burning through its cash at an even higher rate if these prices persist. No thanks, no need to buy the rights now.

[kirk 6] 24/11/2015 07:19

Chris calculated risk is what shares are all about. Seriously consider buying the rights

[chrisbr777] 24/11/2015 06:30

Why not just wait until RI is complete and trade the new LMI share. If you are long Lonmin then this would be the strategy I would employ. Let the dust settle. Its when you want to speculate on arbitrage opportunities that this gets risky.

[chrisbr777] 24/11/2015 06:25

Hi Kirk, I think (my opinion only) that it is quite risky to buy rights in the hope that the LMI price will consolidate well over 1p. You are right that there is a timing issue. You cannot trade the rights for shares before 10 Dec, so there is a holding period of risk between now and then. The arbitrage can only be realised post 10 Dec. And for the reasons in my post below my opinion is that this will narrow to 1p very quickly towards the final date. Anybody buying LMI shares at todays prices is probably making a mistake, but none of us can know for sure. Unless there is a substantial change in the underlying fundamentals of the industry, there is no reason for substantial increase in valuations at this stage. I believe the current LMI pricing is a red herring. However the upside in all of this is that since rights holders will be injecting so much more cash into this, any movements in LMI and LMIN now are insignificant to the consolidation valuation. Big % movements on GBP 30m are irrelevant when this has such a small impact on $450m endgame. Ultimately anyone going into the RI has effectively lost all of their investment as the final company valuation will be very close to the amounts raised by existing shareholders. Not a nice story --- but those who are long LMI can now put their money where their mouth is, so to speak. It may still turn out to be a good investment 6-12 months down the line. The big shareholders certainly think so.

[kirk 6] 23/11/2015 22:28

There must be some catch here with the rights shares its too good a desk to buy? It can't go to a minus 0.001 so the limited downside is only 0.07 atm plus 1p gives a ridiculous difference of 0.2p. It must be some kind of time factor but if the price went up on lmi it would be further exaggerated!!!!!!!!

[typo56] 23/11/2015 21:19

Saltaire, you're a factor of 10 out there. The rights are currently trading at around 0.07p. There wouldn't be any benefit buying them at 0.7p!

[elvisrocks] 23/11/2015 20:58

Saltaire, there is heaps on this subject on this BB. But in short the following reasons:
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1. Currently Lonmin is a pure trading share without any real indication of value. The right to buy and trade the rights, on a few hours notice if that's your thing or hold post rights. If you add up LMIN and LMI mkt cap's today, it would come to little more than the $400 cash being raised. Stupid.

2. LMIN+1 (1.12) v LMI (1.27) suggests arbitrage at work. We don't truly know why. We knew there would be huge volatility at this stage and the Prospectus advised so because of 27bn rights on the market. Huge variations during the day 50% up, 40% down, trades seconds apart 10%+ different, 20-30% spreads etc.

3. Shorting is likely to be at work, also some PI packages aren't letting PI's buy LMIN at all (but can sell them).

4. Macquarie say a right is worth 0.40p in their book versus a TERP of 0.20p

[saltaire111] 23/11/2015 20:49

Trying to get my head around what's going on with the RI. Looking at the market, the RI shares are selling for 0.7p and the rights price is 1p. So why would current holders take up their rights? When they can buy rights at 0.7p?

Can anyone shed any light on this?

Thanks

[elvisrocks] 23/11/2015 20:17

Careful, I was looking for something earlier and came across these Posts from you. 4 Nov and 9 Nov, Posts 4150 / 4881. Both made me laugh and you were spot on with both!
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This share could be driven even lower. At 15p, the previous low, the cap would be £91m against a rights call of £260m. The share merely becomes a traded option, the right to buy the rights. It could get below 10p. Time to look away, this will test our nerves.
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You must be getting tired, it has been a long day. The rights issue will go through with over 90% support.

[lazyhisnibs] 23/11/2015 19:19

Israel gets a bit part very much contrary to reality. True re the Saudi's too. Maybe it was convoluted enough already.

[chrisbr777] 23/11/2015 19:10

Playing around on a spreadsheet here - trying to understand the LMI vs LMIN+1 spread. In my mind, I have come to a conclusion of sorts: the price on LMI today is almost irrelevant. And this could perhaps explain some of the confusion in trying to rationalise it. Why? Assume you are a rights holder with old shares and 46x new rights. Any significant change in LMI price has hardly ANY impact on your combined valuation (try modelling it). And since these old shares will only amount to approx. 2% of the total share issuance post consolidation, the price of LMI today will have very little bearing on the consolidation price (which I now expect to be very close to 1p). Even if you were to try take advantage of the arbitrage this will be unlikely to be successful on a large scale because there simply aren't enough LMI shares available to play with since rights exceed current shares by a 46 factor. Once again, I don't believe current LMI pricing will have any bearing on post consolidation.

[careful] 23/11/2015 18:30

a humorous tale,
and it does not mention Israel or the Saudi Royals.

[grbaker] 23/11/2015 17:32

Hi lazy... cheers and no worries... that POG RI caused me no end of stress, I can tell you!

You may be right about Sapinda's purchases holding up POG's price (they did buy a large amount during the RI). (At the time I wished they hadn't bothered myself, though).

I did post a bit on the LSE back then as well, but I've stopped now... there was so much disinformation about. Some people on the LSE were saying they had bought large numbers of shares... just so they could vote no!

The whole thing was very bad. At least you haven't got somebody like Sapinda trying to muddy the waters here.

GLA.

[elvisrocks] 23/11/2015 17:31

Grbaker, thanks again. I think the follow your rights or 'long' trade here on LMIN is good if you can get them and/or hold them for later, if you can get them ...... My informal guide stick as I posted is Macquarie who appear to have a game in town at 0.40p per right.

[grbaker] 23/11/2015 17:25

Thanks Elvis... it was the same with POG's NPRs: most of us couldn't trade them how we wanted either! Some holders felt they were 'stuck' in them (unable to sell them at a profit, as they traded below what we would have to pay for them later); many couldn't buy them either... In the end, it was cheaper to buy the actual shares (if my memory serves me correctly).

Personally I took up all my rights; as I didn't want to take the risk on trading the NPRs etc.

Many holders were so upset by the value destruction that had preceded the RI and what they saw as the (arguable) incompetency of POG's Management (in taking on so much debt and failing to foresee commodities trading below their cost of production); that many simply did not take up their rights. Sapinda worked hard to scare everybody senseless (stating that they would be voting no): maybe that's why there was less take up of the rights. Who knows.

Hope it works out OK here: at least it's an RI and not a placing (in which holders can't participate)...

[elvisrocks] 23/11/2015 17:22

..... Arguably the LMI/LMIN arbitrage narrowed again to a similar level as Friday if you take that late 40m 0.10p trade into account ....

[lazyhisnibs] 23/11/2015 17:22

grbaker,

Hello, I remember you posting to ADVFN mostly then at the height of the drama on LSE too.


"it was very unclear what they were actually trying to achieve" I agree with that and the "bizarre" bit. No one seemed to know if they had anything like the means to even make their last ditch pitch work. It was all a bit creepy but I do think their buying got POG's share price off (dramatically) the all time old money low.

You probably picked up the reasons Petro has been discussed here but whereas the share price trajectory has been broadly similar since the fear of an RI surfaced the short term moves have been quite different at times, for instance when the RI-focused RNSs were released.

I used to be a holder of POG and LMI and constantly watch for long opportunities to get my money back. I ditched LMI in the early loss stages having learnt from my experiences with POG. With POG I sold my last tranche at a price that would require it at 8p in new money to breakeven but, of course, only had I followed all my rights. I'm grateful I was not faced with having to do that here or there.

Thanks for your reply and the links.

PS: I rarely took a loot at ADVFN's POG BB. LSE's POG BB seemed both more tricky and ironically more helpful than this one. Helpful to people trying to make a harsh decision that is. Tricky in terms of how people were encouraged to hold in to the fall from higher levels.

[elvisrocks] 23/11/2015 17:13

Typo56 that's above me, trading a CFD!