BRM - New Warrant Issue for Barramundi

[Dolcile]

Great buying

[snapiti]

anyone want to have a quess at % of warrant conversion......me thinks 85%

[Basil]

I reckon 77%.

[Bev]

anyone want to have a quess at % of warrant conversion......me thinks 85%

96%

[bulltrap]

Combining info on the last five warrants, with the BRM close price on exercise date (or today for BRMWH):



Looking at the discount to NAV rather than BRM price:



By both measures, BRMWE was similar, and it had a 74% uptake.

I'll guess a bit higher, let's say 80%.

[bulltrap]

 

Tried to exercise my warrants via the form (which took some digging to find), but apparently you can only exercise warrants cleared by close of the preceding Tuesday.

The only advice the web form gives is to email them to 'query this restriction'.

Given that procedural restriction, they really should've ceased trading last Friday, so the CSNs and balances would be up-to-date with final balances on Wednesday, which would give three days to exercise by Friday.

What a shambles.

[keerti]

https://www.smh.com.au/technology/richard-white-steps-down-as-wisetech-ceo-20241024-p5kl6j.html

9% of BRM holding

Wisetech down 25% in one month

Maybe best time to buy Wisetech😊

[moose]

yes interesting timing for BRM - they have a lot of warrant cash that needs a home....

[bulltrap]

OK, I sent them the dollars and emailed them the details. Trust they'll get it sorted out. They'll have a busy weekend ahead.

Assuming 80% uptake, they'll get right on $35M of new funds. At most around $10M of that can be spent on the announced buyback.

So yep, they'll be going shopping.

[snapiti]

thanks bull trap, I think the warrant offering is a total croc of shit, in reality, as the fund pays out all of it's gains in divi's, the only way the fund can grow so the managers can keep increasing their feed from the trough is by DRIP and by poeple exercising warrants.
Really disappointed new holders can buy truck loads of warrants that allows them head shares that will be highly dilutionary to existing SH.
Does anyone know what happens to he shares in the buy back program, are they cancelled or held as stock to be feed back to us in the DRIP program.

[Left Field]

... I think the warrant offering is a total croc of shit, in reality, as the fund pays out all of it's gains in divi's, the only way the fund can grow so the managers can keep increasing their feed from the trough is by DRIP and by poeple exercising warrants.

I agree. I found this post from Alokdhir on the other channel  helpful.

I'm happy I've shunned this type of 'investment'. Having real shares in FPH and IFT over the last 2 yrs has proven much more rewarding.

"If one such person had 100K BRM before warrants issue ...he got 25000 so called free warrants ...his original holding value was 100K x NAV

After 100% exercise rate ( assumed for ease of calculations to show result ) if he doesnt exercise them ...his value of holdings become 100K x post exercise diluted NAV ...which is always less then pre exercise NAV by a factor decided by difference in exercise price and current NAV ...bigger the difference more the dilution . Thus his value of holdings decreases after this warrant issue ...One is supposed to recover this reduced value from sale of warrants but that can get murky when SP discount widens towards exercise date ...which normally happens ...thus such holders end up subsidising new entrants .

Current scenario to illustrate above ...assuming NAV didnt change during the period for ease

Pre warrant NAV 80 Cents ...offer / exercise price 63 Cents / Conversion rate 100% / Post warrant NAV 76.6 Cents ...reduction of 3.4Cents

Wealth loss of 100K holder who doesnt want to exercise his warrants = 100K x 3.4 = $ 3400

To recover this loss he need to sell his 25K warrants for $ 3400 ie = 13.6 Cents each

Current issue it was impossible to sell warrants at price to recover loss of wealth of original holding due to dilution post exercise ...due to widening discount to NAV

In reality NAV changes during issue and post issue etc which makes it very difficult to exactly pinpoint this shortcoming of warrants ...

Main point being warrants are not FREE ...they are equivalent to post exercise reduction in value of one's original holdings" (and a way for the funds to 'grow' by  regular cap raises.)

[snapiti]

thanks for supplying this, I like the company structure for tax purposes and exposure to ASX investments, they have provided a consistent 8% net return, however I have decided I will decrease my holdings over the next few months, mainly because they make up 30% of my investment allocations and I want to lower this because of the unfavorable way the warrants operate for existing holders

[Basil]

I'm going to take the other side of this argument and note that regular warrant issues have been a feature of Barramundi Limited since it listed with the first one issued in 2007 so shareholders have had every opportunity to previously appraise themselves of the characteristics of these financial instruments and the effects on the shares.  Additionally, the full warrant terms are laid out in a comprehensive manner in the warrant terms and conditions booklet that every shareholder is provided with.  I noted at the last BRM annual meeting I attended, there was widespread support for the ongoing warrant program from a broad range of investors.

Buying warrants in addition to the ones you are allocated for free, confer upon the warrant holder an option to further increase their shareholding at a fixed future price and therefore provide considerable optionality around the size of one's holdings in the future.  Further, there can be significant leverage with warrants in a rising market and additionally, one can materially reduce their downside risk with buying warrants and selling the commensurate number of head shares.

I like them and exercised all of my warrants this morning.

P.S. Very strong BounceBack for Wisetech today and a big move by Resmed too. 

[bulltrap]

Really disappointed new holders can buy truck loads of warrants that allows them head shares that will be highly dilutionary to existing SH.

Does anyone know what happens to he shares in the buy back program, are they cancelled or held as stock to be feed back to us in the DRIP program.

Not sure the dilution is all that bad. In theory, the dilution loss should be captured in the value of the warrants. In practice, there was plenty of opportunity during the year to sell the warrants at 4c-7c, which should cover it. That's not ideally suited as a completely passive investment, but you're probably OK as long as you don't let the warrants lapse.

The unit price has been remarkably stable over time. I suppose that's by design, and the warrants are part of it. That suggests existing shareholders likely paid about the same as I'm paying now, fair enough.

Looking into the buyback, they say here:

Shares purchased under the policy are held as treasury stock and are available to be utilised under the dividend reinvestment plan, to the extent permitted by law.

From balance sheet footnotes in the 2024 Annual Report, the bulk of the DRP was new issues, and only 283K treasury shares carried into 2025. Depends on the size of the buyback I suppose.

[Basil]

Closing NTA as at close of trading on the ASX today, bang on 79.0 cents by my calculations.