RE:my naive understanding about the newsjiayouha wrote: I am not sure but my understanding is that KAT will not issue any shares. KCC will do this. To make it simple, it sounds like that KMLF collect all debt and will forgo a part of it, financed by net debt issued by Glencore. ALL shareholders of KCC are not diluted by issuance (like KMLF give free money to DRC). Such transaction will affect cash flow (interest payment and earnings) of KMLF (therefore our KAT) collected from KCC. What's worse, KMLF needs to pay interests to Glencore for the new debt. However, considering the cash cow feature of KCC, I believe such debt reduction has limited effect on KAT and KAT stock price will skyrocket in the future when tons of cobalt are produced. Thanks for reading.
The key line in the pay wall article (but just readable) is:
"Glencore said Katanga mining will issue 5.6b$ in stock"
Well that clearly sounds like massive dilution to me. Strange that the SP went up 26% after this news!? From the official message this converstion of debt to equity is not so apparent. But then again the news release is mainly about KCC. And the way I understood it was that Glencore has given a loan to Katanga, which has passed on this loan to KCC. Now KCC is converting the loan into equity (25% of that equity going to Geacamines). But Katanga still has its loan to pay to Glencore. And the news does not cover what happens to that. The WSJ (paywall) article says that Katanga will also resolve this by issueing equity.... So yes, that would lead to massive dilution. So who was buying so massivly yesterday!? With dilution coming shorters will not have been in a rush to cover... . Also for other people buying yesterday with the view on the massive dilution coming does not make much sense....
The only buyer that makes sense would have been Glencore itself. Just to increase their Katanga holdings even further and possibly take it from the market. I believe they have about 85% already and at 90% they can (or even must) make an offer for the remaining 10%.
Will be interesting to see how this goes in the next days and weeks!