By Tom Winnifrith, The Sheriff of AIM | Wednesday 7 June 2017
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
If it is not it is close. Alecto Minerals (ALO) shares in which are expected to resume trading on AIM has announced that it has secured a £800,000 loan repayable in six months for £800,000. But look at the terms. They are outrageous.
The interest is a fixed 20%. So that is £160,000. The fees payable to the arranger ( Beaufort Securities) are £50,000 and certain of its clients who have provided the loan get another £66,250. So that means that the total costs of getting the cash for six months are are mind numbing £276,250. Put another way the annualised cost of this loan is 69%. Fuck me, I am in the wrong business.
The interest and fees will be repayable in shares so that is a monumental overhang. and the loan can be repaid in shares too. Loan noteholders have the right, but not the obligation, to convert part of, or the whole of, the principal amount outstanding under the Notes into new Ordinary Shares at any time. During the first ten trading days following the date of Re-Admission, the Noteholders can convert the principal amount of the Notes at a conversion price equal to the lower of (a) the closing price per Ordinary Share on the trading day immediately after Re-Admission and (b) 80 per cent. of the closing mid-price per Ordinary Share as quoted on AIM on the trading day immediately prior to the date of receipt by the Company of the conversion notice in question (the "Floating Price"). Following that initial ten trading day period, the conversion price will be the Floating Price.
In other words note holders and can forward sell and then convert at such a discount that they are in the money. This is almost entirely risk free loan which attracts the most usurious of charges. It is shocking that Alecto has agreed to it. Of course shareholders who are being diluted to oblivion pick up the tab, management keep getting paid and the advisors coin it in. Such is AIM. What's not to like.
Once again it is coke & hookers all round in the Square Mile and fuck the small shareholders.
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