The off-shore miner disclosed late last week that the final price for its follow-on offer would be P0.08/share. The prospectus that Apollo Global Capital [APL 0.11 3.45%] put out on the same day (but that still contained variable pricing before the pricing was set), said that APL would still use 85% of the proceeds to purchase a 49% stake in Poet Blue Ocean Offshore Services Pte (PBO), a corporation registered in Singapore, which owns a vessel that APL plans to use for its off-shore mining activities.
The rest would be used to purchase “environmental and ecological mitigating measures, equipment, and insurance” in the 2nd half of 2021. According to the prospectus that APL released, the offer period starts today (August 16) and runs until Friday (August 20), with the full listing of the FOO shares on August 31.
MB BOTTOM-LINE
A company would normally price its FOO at a little discount (not as big of a discount as a stock-rights offering, though), but that FOO discount is rapidly eroding for APL and its potential FOO buyers as the date for the FOO approaches. When the FOO was first announced back in February, APL was trading at P0.25/share (68% discount), and when the FOO was approved by the SEC last week, APL was trading at P0.13/share (38% discount).
Now, APL is trading at P0.112/share (29% discount). It’s not required to own APL stock to avail of the FOO, so we should not anticipate any demand support for APL’s price from people holding the stock to avail of the opportunity to buy additional shares as they would if this were a SRO. Where will the price be when the offer period ends? We’ll have to wait and see... just as we’ll have to wait and see whether APL has actually started commercial operations or not, since it has yet to make a definitive statement in that regard, and it missed the Q2 filing deadline for the earnings report that should have told us all about it.
If I were an APL investor (which I am not, but still) who bought the stock in February at P0.25/share when the management team was talking proudly about commencing operations by March, only to then receive a series of confusing updates that seemed to imply that the company had not yet started operations, culminating in a FOO that would dilute my holdings to purchase a stake in a ship from a Singaporean company (who owns PBO anyway?)... well, I’d have some pretty serious concerns about the focus of the company and its ability to execute the plan that it sold investors at the start of the year.
As I’ve mentioned before, mining is a flow business: there is no “making up for lost time”. Every lost day is revenue that APL (and its investors) will never get back.
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