BHP - Astonishing result

[BlackPeter]

Actually there is no inconsistency in what I said, I suggest you just misunderstood it.
By paying for it twice its the equivalent of giving it away.
I.e. paying 100% for something you already own or give it away, its the same effect.


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So could you point us to your source of information, which says that shareholders are paying twice? That's not what the company says ...

[Daytr]

Already answered Black Peter by posts above. Its my take on what has been announced to date on how the spinoffs usually work.

[macduffy]

Already answered Black Peter by posts above. Its my take on what has been announced to date on how the spinoffs usually work.

We're not dealing here with how spinoffs "usually work" but with the official company announcements relating to a specific spinoff. But let's wait until mid-March for the paperwork to shareholders. Meanwhile, BHP's shareprice looks pretty solid in recent days.

[Daytr]

Macduffy, sure I agree there isn't enough detail, but that's how I interpret what they have put out to date.
How does the new company get funded otherwise?
My other main question is what happens to the significant amount of debt that is related to the spun out assets?
Does it say within BHP in its entirety or does some get apportioned to the new entity.
I would suggest all debt stays with BHP, but that's just speculation on my part.

[JimHickey]

Actually there is no inconsistency in what I said, I suggest you just misunderstood it.
By paying for it twice its the equivalent of giving it away.
I.e. paying 100% for something you already own or give it away, its the same effect.

I was involved in a similar exercise & foolishly I thought management would look after shareholders, but they spun out the new assets & if you wanted to participate you had to buy shares in the new company. Its a bit different here as they are off loading mostly what they don't want, but they will need cash in the new company & that's how they raise it by selling the shares. So effectively its like a giant capital raising but all the funds stay in the new entity & the original owner only gets a right to participate. Well that's how I read it anyway.

This is what is wrong with this forum.

People that cannot get basic concepts correct and continuously post factually incorrect information.

The mods think they are better giving warnings to people posting the word "bollocks".

[kanaka]

This is what is wrong with this forum.

People that cannot get basic concepts correct and continuously post factually incorrect information.

The mods think they are better giving warnings to people posting the word "bollocks".

In total agreement with your comments

[Daytr]

Explain please ?

This is what is wrong with this forum.

People that cannot get basic concepts correct and continuously post factually incorrect information.

The mods think they are better giving warnings to people posting the word "bollocks".

[macduffy]

FWIW, Morningstar have a preliminary fair value estimate of $1.50 - $2.00 for South32 and a corresponding reduction for BHP, based on an estimate of 5% of BHP's fair value estimate. Seems as good a guesstimate as any! The rest of the article is behind a paywall so if anyone has access......?

[Daytr]

So $1.50 -$2 of BHPs SP? So they are valuing the new entity in the region of $10Bln by the sounds.

[macduffy]

So $1.50 -$2 of BHPs SP? So they are valuing the new entity in the region of $10Bln by the sounds.

Going on Morningstar's $1.50-$2.00, rightly or wrongly, and the 3.211b issued shares disclosed in the latest annual report, I calculate South32's theoretical "fair value estimate" at $4.81B - $6.42B. Other guesses welcome!

Incidentally, BHP's SP is up nearly 2% today.