Q: I unfortunately own GXE and learned from this site that around 2/3 of the company will be disposed of in early 2025. The paper napkin math indicates that the current market price should be around 90 cents per share (offer of 61 cents for 2/3 of the company plus around 30 cents for the 1/3 that will be transferred to Newco).
How is the current price only 54 cents and dropping? Even the cash offer of 61 cents is notably higher while Newco is valued at zero. What am I missing?
How is the current price only 54 cents and dropping? Even the cash offer of 61 cents is notably higher while Newco is valued at zero. What am I missing?
5i Research Answer:
We have comments on the deal posted in the Q&A, but much information is not yet available as the circular has not been filed. The value of the spin out can be debated, and we would not assume it is worth 1/3rd of the total. Also, the total cash component is capped, so investors cannot assume they will get 61c cash: it will be a combination of shares and cash. We also find it quite bizarre that the name of the buyer has not been disclosed. The decline in price could also just be due to tax-loss sellers. Finally, there is always 'deal risk'. Nothing is guaranteed until compensation is received by shareholders. But, we will know more here when the circular is released.