No, I don’t either. i tried posting on lse.co.uk where there are some old people from here that used to post to see if they have any ideas as to what SLE re trying to achieve with this buyback, and I just got a lot of abuse, basically, and typical answers such as ‘is the company not Tosca who decided to do the buyback’.
This conveniently overlooks that the board works for the shareholders in any company and that Tosca, with 72% of voting shares’ had to vote for the buyback at the AGM.
So no change from that bunch of sheep who I could point to several predictions for the company they made here and got wrong - not to mention predictions i made that were correct and which they spent a long, long time rubbishing.
Really, given that there have been no answers from anyone here and the avoidance of answers from those who like to cosy up to O.F. at shareholder meetings (the only reason i thought they might have some idea of the motivation for the buyback as they are generally clueless themselves) etc then the conclusions I have come to are that:
- Tosca and friends are using monies (generated by the loan notes) that are supposed to be paid back to the shareholders to reduce the number of shares and enlarge their own percentage holding. I guess this makes it ultimately easier (cheaper) for them to take the company private. It is mostly their own money, of course, but some people will squeeze every last bit of blood out of the stone if they can. Its hard to see any other motivation.
However, I’ll try for reasons of fairness …
They are putting off paying out the money owing, by way of ‘dividend to be announced in due course’, which is supposedly on hand to the tune of over $30m for reasons I cannot fathom.
They are obliged, by terms of the 2016 agreement to make a bi-annual return of cash to shareholders. They may announce another buyback when this one finishes, probably mid Jan, and might just possibly argue that they have fulfilled their agreement to make to re-payments within the year.
They would still have plenty of cash on hand which they can’t just disappear though, so why they’d do that i don’t know, but I wouldn’t rule anything out with SLE. I’m afraid that loan note cash may somehow make its way into the losing operational side and shareholders wont ever see it again.
This would take a EGM or be done at the next AGM, but of course we already know the outcome of any vote.
- Maybe they genuinely believe SLE is undervalued by the market, in which case a buyback is generally a good idea, especially if the price keeps falling…
The thing is, when management truly believe this is the case and choose to use cash for a buyback, they normally can’t shout it loud enough and they buy heavily while the price is down and then stop when they achieve a certain predetermined market price (as set out in pre-defined parameters to the third party that conducts the buyback).
- Maybe they hoped a buyback would hold up the price, which it largely has so far, just. Why would they care? It means anyone making an offer to buy out the company would expect to pay a premium to the current market cap.
The problem with 5) is that a) Tosca can say no whatever the offer is if they wish and b) it would have to be a helluva a premium from here for most holders to make any money, including Tosca.
We’ve seen no sight or sound of the parameters SLE have given to Cantor about how to conduct the buyback. That isn’t that unusual in itself, but there is also nothing stopping them telling us what they hope to achieve.
What we have seen is an apparent instruction to spend £25k per day on shares in one lump sum which is just about the worst way to conduct a buyback usually.
It is especially strange as the buyback is defined is US dollars, so such an apparent instruction makes the length of the buyback entirely dependant on the exchange rate which, when the buyback was announced, had every chance of being erratic as hell during the period of the buyback.
It is pure luck that it has actually stayed around 1.28-1.30 GBP/USD for the whole period, a length of stability not seen in the exchange markets for this currency pair for at least 4 years prior to this period.
SLE are terrible communicators though which is why i always believed the share price would slip down over the summer. Mind you, I wasn’t expecting a loss in H1 either, so it has gone much lower than I expected.
It wouldn’t surprise me in the slightest is SLE’s motivations were ‘buybacks are fashionable lets do one because we have all this cash on hand’ I find it hard to believe Martin Hughes of Tosca would swallow that line though, however it was presented.
I wonder why they extended those warrants for Brandon Hill (30 sept RNS). A deal is a deal … what was THAT all about? Seems like some friends do get favours, that is potentially giving away a gift worth nearly as much as this buyback … of our money.
I can’t wait to wash my hand off this company, to be honest. If i get the chance to sell out @35p before next summer I’ll be gone for good with my profits this time. The loan note cash only lasts for so long and if you can’t make a tier 1 asset like oml18 pay, there really isn’t much hope.