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InterOil Corporation Message Board

  • kencooksam kencooksam Dec 23, 2013 7:50 AM Flag

    The dilution myth explained

    Let's deal with facts vs what the distorters state.

    The IPI is neutral to current shareholders. Here's a way for people to understand. You now own a house and want to add a two car garage. You build that garage (like buying more of E/A) you have to pay to build that garage (like paying the IPI in cash or stock) and your new house is now worth lots more because it has more appeal to a buyer(E/A has more appeal to their buyer Total) . You still own your old house (like IOC will own their 58.6 percent still)so you have not lost any value but your new house is worth buckets more because the world of potential buyers find that garage addition( the IPI added interest in E/A) now terrific and more want to buy your house . So their are more potential buyers for your new larger homestead.

    So interested they will cut a deal to buy a chunk from you now and leave you uncapped upside with a 30 percent interest in an LNG plant.

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    • From Relker on SHU

      "A 50 % stock dividend will reduce share value by 100/150=33% normally speaking. So, if someone buys a March call at 60, he can loose a lot of money if a dilution takes place."

      Sentiment: Hold

    • housethesupremesbuilt housethesupremesbuilt Dec 23, 2013 8:18 PM Flag

      kenny explain all of your call sales and the timing
      were you on the phone with the barrister? shame shame that is inside trading

    • housethesupremesbuilt housethesupremesbuilt Dec 23, 2013 8:13 PM Flag

      oh i farted hard on that one, smelled roses and chocolates

    • Kenny,

      You haven't offfered up any "facts" just some rubbish about garages and in buckets.

      The confusion over IPI is simple. Nobody knows what it is going to cost to buy them out. You seem to be kind of arguing that the deal will be "neutral". I actually agree with you, that either the economics will be pass-thru (e.g. IOC pays a percentage of what is received from Total etc), or they will have to negotiate a fair value equivalent.

      I think the latter is more likely as it's cleaner to get rid of them now. I think RJ is wrong that they can just pay $240 to get rid of them - that would be a huge scalping - if everyone on the IOC island thinks it's 9.9 Tcfe then their share of the cash payments from Total will be over $1 Billion, plus a retained interest. It would seem odd for IOC to now start arguing to IPI investors and the world that it's (for example 5.4 Tcfe or less).

      My speculation is that they will have to pay something "fair" now - there's upside and downside risks going forward and a dollar now is worth more than a contingent dollar later, but I don't see Civelli et. al. selling on the cheap. If I had to take a stab it will cost $1 Billion. That is the amount of cash they would get at the 9.9Tcfe level but they would be trading their retained interest/upside for the certainty.

      The problem is IOC to cough up something like $1B now will consume a fair bit of cash (maybe that's the real reason for the $250M bridge loan), but if IPI is getting liquid stock the lower IOC goes the more shares they have to issue - this could (I have no idea) be the concern now. It also seems to explain why IOC is so desperate about the share price right now - humping the story all over the world to "institutions" who seem to be unimpressed.

      I'd say the market is worried about a "neutral" deal being paid now. As a tail risk the IPI investors have IOC over a barrel with the deal and may extract those juicy economic rents STP likes to talk about.

      Sentiment: Hold

      • 1 Reply to bonkthegrups
      • Excellent analysis, Bonk, and I agree. We are talking Carlo Civelli here and others like John Mack. I imagine IPI will get its just due. In fact, I am looking forward to seeing how this plays out for any information it could contain. Civelli likely knows more about E/A and all else IOC than just about anyone else, including Hession, simply because he has been there for so long and has had his fingers in the pie so to speak for eons (who can forget the usurious Civelli midnight loan from a few years back, at an APR north of 20%, which the Company was so proud of?). Thus, the terms of the IPI deal may be quite revealing.

    • Kenny that may be so, but like the little boy who cried wolf so many times...NO ONE BELIEVES YOU ANYMORE!!!! You have destroyed your credibility and your posts, even those with merit are laughed at. IMO

      BTW please explain why we are not getting $2.00 for our gas?

    • I was going to say nice apples to oranges comparison, but this garbage is more like apples to toasters.

    • Yes Ken , it appears that most people understand with the exception of the bashers.

      Sentiment: Strong Buy

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