RE:RE:RE:RE:Merge With MAE: What Should Be MAE's Part Of SGNLGrumpyInvestor wrote: I was not criticizing the different factors you put forward in trying to establish a realistic comparative value for MAE in relation with SGNL. The problem I have is that you state that a reasonable value would be around 20%, but by giving 0,2 shares of SGNL for each share of MAE you end up with 80M new shares for MAE's shareholders compared to 193M for current SGNL shareholders. If you value MAE at 20%, you have to issue shares in accordance. That would be about 40M shares of SGNL. That's 0,1 share of SGNL for each MAE share, or about 0,04$.
It's not a question of premiums, discounts, market caps or number of shares, it's a question of RELATIVE VALUE between the two companies. If you say that MAE is worth 100% compared to SGNL, then you should end up with the same amount of shares for each group. But when you state that it's worth 20% of SGNL (5 to 1), then you have to compensate with the corresponding number of new shares in exchange to end up with a ratio of 5 to 1 after the merger. Sorry, but the numbers you give don't work if you say the relative value is 20%.
You are totally right Grumpy, the shares count does matter and MAE's shareholder will get 0.1 SGNL share for every MAE share they own after we take the float of each company. Thanks for your precision.
And yes MAE's shareholders might be astounded if they throw SGNL market captitalisation in the equation but in an all shares deal, it's not what they should look for unless they wish to ca$h out right away. We both agree that SGNL is waaaayyy undervalued right now so making an offer base on market capitalization would not be a good option for SGNL. I would add that it was not a good option for MAE neither last week at 4.5 cents a share in the last couple of weeks. Speculation is high in the current market and it's easy to manipulate the share price of both companies right now so that's why I did not want to throw market capitalization in my calculation.
If MAE wants to get a premium, they should negociate it by increasing the 20% up and justify it at the table. Since one company absorb the other one, what is important is the future of the merged entity. And in such a deal with SGNL, the future for MAE shareholders will be much brighter since the new entity will be an intermediate player operating in 2 provinces of Atlantic Canada thus getting a rerate fast and even be considered by some majors as an interesting target. You would get at this time a lot more than a small premium.
So it would be like a "better future vs quick exit" kind of decision for MAE's shareholders. If they choose for a quick way out, than I think they would not get the maximum out of a deal (and it will not be with SGNL unless a financial partner is joinging them). But that will not happen IMO as MAE's sheet is not nice (I heard that Q3 financials will not give a good impression to the markets) and management has painted themselves in a corner.