Posted by VenFx > 2016-03-28 19:41 | Report Abuse

Revenue from the new acquisition asset generated a very poor over the $0.460 per share. Highly premium. Warrant definitely a gone case.

Posted by Desa20201956 > 2016-03-28 22:43 | Report Abuse

jayloh

you write well and with indepth knowledge.


nothing to add.

Posted by bcllct > 2016-03-29 00:43 | Report Abuse

I agreed with most of what you say in general regarding SPAC. It is also too risky for retail investors to buy sona warrant as it had a definite probability of expired worthless.

However I do think the probability of QA being voted yes is more than 50%. And that the two institutions( CS & PAG) may support the QA by voting yes( or partly voted yes).Their motivation is to maximized their return.

My point is that the better outcome for them is that QA is successful and they get their shares repurchased hence getting a better return since the holding period reduced. This will Not happen if they voted No 100% since they alone hold 27.76% which will count for a min of 34.7%( 27.76/80) if all the 80% qualifying shares vote. So if they vote No that is it! QA will be dead!

So they could try to vote in such a way to get the QA through and get higher return for part of their holding. To make up the potential shortfall in return from their mother shares not repurchased, they can buy the warrant at current low price( indeed warrant seem to move up (last Friday and today)knowing that the WA will shot up if QA is approved.

Also, If CS and PA had indeed indicated they will vote No then there is no point for the latest ( last Friday) capital repayment announcement. So it seems that CS and PA will be supportive of the QA hence the need to still encourage the minority at large to vote Yes or to reduce the No vote.

It will be interesting to see what actually happen!

Posted by jayloh > 2016-03-29 07:37 | Report Abuse

bcllct, your idea is certainly interesting but it could be difficult to implement.

Firstly, they will need to know roughly how to split between YES and NO to get QA through, yet protecting their investment. Making it back through WA is again possible but risky.

Secondly, if QA is through, WA may go up (due to the discount) but the mother may not. it could easily go down, as now EGM is over, if you did not vote No, there is no avenue available for you to get back your cash anymore. So the cash 'floor' on the mother would be gone. who knows how much the market would value such junior O&G company?

It is the institutions' choice whether they want to go long term and short term. Long term I have detailed the risks. Short term the options are to vote No or attempt what you suggested. Comparing the risks and returns I would still go for the former any other day. But hey it's not me who's voting, so let's see what actually happens. Thanks for sharing though.

Posted by jayloh > 2016-03-29 07:43 | Report Abuse

just to clarify, the outcome in the article which I mentioned getting your cash back by 3Q2016, it's based on my estimate that if QA fail, the management would proceed gracefully with liquidation instead of delaying until 30 July deadline. And the 6 months timeline is the estimation I got from my administrator/liquidator friend. Companies with minimal creditor and little assets to liquidate could be liquidated in shorter timeframe, according to him.

Posted by kakashit > 2016-03-29 14:24 | Report Abuse

http://klse.i3investor.com/blogs/kakashit/93088.jsp

check this out, u should go for blue ocean instead of red ocean

Posted by sheep > 2016-03-29 14:29 | Report Abuse

beware of cons

Posted by richdad_88 > 2016-03-29 15:46 | Report Abuse

u should hv wrote this article much much earlier. many WA holders oredy get burnt by SPAC counters.

Posted by JeevS > 2016-03-29 18:07 | Report Abuse

wow desa maybe you should start reading more... thanks jayloh

Posted by Mat Cendana > 2016-03-30 01:13 | Report Abuse

Excellent post and analysis by @jayloh. Much better and more informative than what we've been reading in the newspapers. Or by the investment bank analysts.

Posted by curious2 > 2016-03-30 05:26 | Report Abuse

How about Red Sena W can buy?

Posted by jayloh > 2016-03-30 08:30 | Report Abuse

curious2 In general I would not recommend to buy the SPAC warrant, mainly because there is no way of estimating how much is it worth until QA is announced and also because of all the dilution effects. but I do think F&B is actually better biz for SPAC investors than O&G because F&B biz is generally less capital intensive and could generate higher ROE. it is more likely to generate free cash flow sooner as well but still too much uncertainty at this juncture

Posted by jayloh > 2016-03-30 08:34 | Report Abuse

thanks everyone for the views and comments. it is my first article here. for now, i will try to write an article a week, topics could range from individual stocks, industry to wider economic/social/political issues. so if you are interested, stay tune

Posted by VenFx > 2016-03-30 08:45 | Report Abuse

Amongst the Spac , u trust Rsena shall deliver the results. Most importantly their management are genuinely looking for quality assets and the benefit of shareholders.

Posted by 3iii > 2016-04-03 12:01 | Report Abuse

jayloh Thanks for your great article. I have been educated.

Posted by 3iii > 2016-04-03 12:07 | Report Abuse

Re: SIZZLING SPACs (aka CASH SHELLS) - LEARNING FROM OVERSEAS EXPERIENCE

US
Yale University expert study: US SPACs with completed acquisitions between 2003 and 2008 posted negative returns in excess of 36.5% a year.

Another study: Half of all SPACs launched in the US in the past decade have completed an actual acquisition, and have posted negative annual returns of 18.6% on average.


South Korea
Daewoo Securities Green Korea Special Acquisition Co was the first SPAC listed in South Korea in 2009. It has been delisted from the Korea Stock Exchange effective Oct. 15, 2012.

Mirae Asset No. 1 SPAC, the other of the first two to be listed in South Korea, has also been delisted.


Malaysia
The first SPAC listed in Malaysia, Hibiscus Petroleum Bhd, also South-East Asia's first, has put up a spectacular performance so far, currently trading at double its IPO price of 75 sen. The company is in the midst of starting its oil drilling programme, having fulfilled asset acquisition requirements.

Malaysian SPACs are given three years to secure a qualifying asset, or 90% of the IPO proceeds must be returned to the IPO investors.

[Hibiscus IPO price was 75 sen per share. After acquiring its QA, what has happened to its share price? Its present price is 19.5 sen per share.]

Posted by 3iii > 2016-04-03 12:12 |

Post removed.Why?

Posted by 3iii > 2016-04-03 12:17 |

Post removed.Why?

Posted by 3iii > 2016-04-03 12:21 | Report Abuse

RISKS RELATING TO IPO OF SONA

THERE CAN BE NO ASSURANCE THAT THE ISSUE PRICE WILL CORRESPOND TO THE PRICE AT WHICH OUR SHARES WILL TRADE ON THE MAIN MARKET OF BURSA SECURITIES UPON OR SUBSEQUENT TO OUR LISTING.

IPO INVESTORS WOULD FACE IMMEDIATE AND SUBSTANTIAL DILUTION IN THE NA PER SHARE AFTER THE IPO.

The Issue Price is higher than the NA per Share before the IPO.
Management Team paid RM 0.01 per share
Initial Investors paid RM0.35 per Share.

BEFORE THE COMPLETION OF QUALIFYING ACQUISTION:
SONA PRO FORMA NA PER SHARE
RM 0.05 PER SHARE
THEREFORE, IPO SHAREHOLDERS WILL EXPERIENCE AN IMMEDIATE DILUTION OF RM 0.45 PER SHARE, AFTER THE IPO AND ADJUSTING FOR THE ESTIMATED LISTING EXPENSES.

AFTER COMPLETION OF QUALIFYING ACQUISITION,
ASSUMING THE MAXIMUM SCENARIO, THE NA PER SHARE WILL BE RM0.38 PER SHARE, AND THE SHAREHOLDER WILL EXPERIENCE DILUTION IN THE PRO FORMA NA PER SHARE OF RM0.12 PER SHARE.
ASSUMING FULL EXERCISE OF THE WARRANTS, THE PRO FORMA NA PER SHARE WILL BE RM 0.37 UNDER THE MAXIMUM SCENARIO, AND YOU WILL EXPERIENCE DILUTION OF RM0.13 PER SHARE.



Initial investors: Investors who have invested in the Company PRIOR TO the IPO under the Subscription by the Initial Investors.

IPO or Public issues: 1,100 million Public issue shares + 1,100 million attached Warrants

IPO investors: Investors who subscribe for the Public Issue Shares

Issue Price: $0.50 per Public Issue Share

Maximum scenario: The scenario whereby an amount of RM 550 million is raised in the IPO.

Permitted timeframe: 36 months after the date of listing



WARRANTS

SALIENT TERMS:
Expiry date:
- 5 years from the date of listing if the Qualifying Acquisition is completed within the Permitted Timeframe or
- 3 years from the date of listing if the Qualifying Acquistion is not completed within the Permitted Timeframe.

Exercise period: anytime
Exercise price: RM 0.35 per Warrant.