SKT Sky Network Television Limited.

[Baa_Baa]

Those market cap numbers you mention ...So you saying have a big cap raise and the market rerated you big time.

Maybe he's saying the raise is used to pay down debt, so net stronger balance sheet. But yeah, raise at 12 and it doubles overnight to 20-25? Who wouldn't buy at 12 if that was the case! Just seems so desperate, not the shareholders discussing here, but SKY itself.

[winner69]

Has cap raise discussion meant profit downgrade for F20 been put on back burner?

[mistaTea]

Just seems so desperate, not the shareholders discussing here, but SKY itself.

I guess it has come down to Sky not generating enough cash to finance their ambitious growth opportunities AND pay back the maturing bonds. You could describe that is desperate I suppose. The banks would not lend them any more money (without a cap raise as a condition) so yeah, it looks like they really didn't have any other option.

Most of the 'desperation' comments I have read seem to revolve around this apparently 'hugely discounted' cap raise though. As in, they are so desperate to get money they have discounted their shares by 68% to get some money.

That is not actually true. As mentioned earlier, they are effectively raising money at the equivalent of 34c/share (which is roughly what the stock has been trading at). If I was in a bad mood, I would probably describe this offer as cunning.

It allows them to raise the maximum $$$ given the low SP, and also pretty much forces most existing investors to participate (or face oblivion).

[Dlownz]

I don't think that price would hold at this stage. I expect it to trade down lnto as low as 15 cents maybe lower.

[mistaTea]

I don't think that price would hold at this stage. I expect it to trade down lnto as low as 15 cents maybe lower.

You may well be right. But that would still represent a market cap of ~$250M.

If the market behaved rationally, I would have thought a market cap of $300M would make more sense though.

Surely, if the business receives ~$150M new capital (after deducting professional fees for the cap raise etc) then the business would be worth at least that much more than the pre-offer market cap.

[Ogg]

raise at 12 and it doubles overnight to 20-25? Who wouldn't buy at 12 if that was the case! Just seems so desperate, not the shareholders discussing here, but SKY itself.

It doesn't matter what the price was as it was a "pro-rata non-renounceable" entitlement offer. Could have been done at 1c but at 34 for 1.

Goldman probably looked at the trading history and saw that the 52 week low was 19c, so wanted that price, which is about 12c post placement. They only got 4% of the issue anyway.

Doesn't matter if Goldman buys $148m at 12c or if everyone takes up the entitlement.

Doesn't matter how many shares on issue either

What matters is market cap at open.

17.5c looks likely but given that funding is now secured and the broadband announcement, I'm expecting it to trade higher.

I also suspect that the reason it traded up to 48c a couple of weeks ago was because news leaked of this placement.

[mistaTea]

What matters is market cap at open.

Yes, absolutely correct.

And in managements defence, the way they have structured the deal will probably benefit participating shareholders in a big way.

Despite their efforts, they could not hold the SP let alone increase it. No matter what they did - the SP just kept falling. Largely due to sentiment around debt levels etc.

So raising capital to clear the debt burden, if that means 'the market' gives the company another look and decides it is still a viable going concern with a large upside...then this move may well increase the market cap (beyond just the amount of the cash injection) of the business significantly more than if they tried other strategies that did not include the cap raise.

If that makes sense?

Put it this way, if they were to pull this off and the market cap grew to $1B...existing shareholders who participated in the cap raise will be lining up to lick managements asses. They would be heroes.

[mistaTea]

Doesn't matter if Goldman buys $148m at 12c or if everyone takes up the entitlement.

I think this statement is also very important for everyone to understand. Whether or not any existing shareholders take up their entitlements - Sky TV are going to get the $148M.

So there is no question as to whether or not this cap raise will be 'successful'.

As Goldman have underwritten the deal (and therefore guaranteed that they will purchase any entitlements that have not been taken up) the money is now locked in for Sky.

All that remains to be seen is what the participation levels are of existing shareholders. But that is just 'out of interest' - it doesn't make any difference to Sky TV.

[winner69]

I think this statement is also very important for everyone to understand. Whether or not any existing shareholders take up their entitlements - Sky TV are going to get the $148M.

So there is no question as to whether or not this cap raise will be 'successful'.

As Goldman have underwritten the deal (and therefore guaranteed that they will purchase any entitlements that have not been taken up) the money is now locked in for Sky.

All that remains to be seen is what the participation levels are of existing shareholders. But that is just 'out of interest' - it doesn't make any difference to Sky TV.

Forsythe Barr are also underwriters

Have a few client accounts to put the shortfall (if any) in to ...without flooding the market if left with a lot.

[winner69]

I suppose Black Crane will be fronting up with another $7 to $8m ....maybe it was their ‘activism’ that brought this cap raise on?

Wonder what those 2 big shareholders who recently sold down are thinking ...or did they sell at good price to fund the new shares at 12 cents? Aren’t I cynical