KNM 7164 Rights issue - case study

RENOUNCEABLE TWO-CALL RIGHTS ISSUE OF 488,920,659 NEW KNM SHARES AT AN ISSUE PRICE OF RM1.00 FOR EACH RIGHTS SHARE ON THE BASIS OF ONE (1) RIGHTS SHARE FOR EVERY TWO (2) EXISTING KNM SHARES HELD AT 5.00 P.M. ON 18 OCTOBER 2012 TOGETHER WITH 488,920,659 DETACHABLE WARRANTS ON THE BASIS OF ONE (1) WARRANT FOR EVERY ONE (1) RIGHTS SHARE SUBSCRIBED FOR, OF WHICH THE FIRST CALL OF RM0.40 IS PAYABLE IN CASH ON APPLICATION AND THE SECOND CALL OF RM0.60 IS TO BE CAPITALISED FROM KNM'S SHARE PREMIUM ACCOUNT

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case study in progress

so,

1. effectively if you own 2 shares now, you will get 1 additional share.

2. a warrant to buy share at 1RM, of which the company will pay 60sen and you pay 40sen

indeed +1

1)however we do not know how much is the new warrant term sheet

2)and secondly need to view this fundamentally as whether this dilution of shares would be good and the sale of the other company it has

where do the company insider stand?

do we know? RHB is doing this.

mataseri wrote:where do the company insider stand?

do we know? RHB is doing this.

point to ponder

KNM 7164 current rights issue

date of announcement 4th OCT

Entitlement ex date 16th

start of OR trading 19th

close of OR trading 25th

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recently we took this as a case study of the OR,

alot of people didnt understand the meaning of this OR which the mother share holder need only pay 40% for getting the mother share conversion done.

Many did convert it the way as of paying 40% and i get a warrant sweetener about 15 sen (winghaur credit for his calculation)

lets get down into details in these two scenarios

scenario 1 -average investor holds KNM at avg eg: 0.72 sen 100lot (10,000unit)

1)normal market perception

100 lot X 0.72 = 7200RM

> 50 lot OR X 0.40 = 2022.15 RM plus fees (normal market assumption for this special OR which the company pays 60%, holder pay 40%)

total costing 150 lot = 9222.15 new cost avg price 0.61

this is not true, for the real calculation based on the term sheet release

b)
50 lot X 1.00RM = 5000RM

so total is

150 lot (5000+7200) = 12,200RM / 15000 = avg 0.813

what will happen to the investor with the current price levels on the mom share? will he gain a good deal or just tried to raise his avg price on his holding?

2) Gung ho retail speculator

buys KNM-OR 0.16 for eg: 100000 units = 16,000RM

a) expects to pay assumingly 100000 X 0.40 = 40,000RM

total value expected for 100k units is 56,000RM, this might be as the same expectation from your retail investor where in actual fact

b) 100000 unit X RM1 = 100,000 + 16000 = 116000 RM for 100,000 shares
works out to be avg price 1.16 RM

true value reveals on avg pricing

so many may argue i did pay 40% only for it , however we look at paper value 1.16 & you paid lets say in this example 56k for a stock that is worth 1.16 however the mom stock is 53.5 RM

if you sold now you would be losing a huge sum of your % avg price
what happens if the mom is 45 sen and you cut it ? 71k gone

is it worth the risk? i dont think so, many in the market think it is. not worth the trouble and thinking

just a thought and credit to mabs

+1 for cals
i trade it like normal stock

woi u gotta rep me oso. i asked cals to do this case study n im the one explained until saliva dried + sore throat just not.

give la rep.

okla rep to you

got expired date?

mabs wrote:woi u gotta rep me oso. i asked cals to do this case study n im the one explained until saliva dried + sore throat just not.

give la rep.

nah some beer for u
2 reps to u

speculators gain more hor....i gt some frens bought at 15 n exercise....they say if they lose money means all of the investor lose money too