Largo Inc T.LGO

Q1-21 Warrants

[kha341]

Just a reminder that 25.5M warrants (strike = C$0.29) will expire next Thursday (Jan 28).

[st_esteban]

Would not it be max 12 million? 25 million - 13 million from ARCFI = 12 million

[kha341]

Yes, indeed.

[kha341]

Come to think of it the 13M warrants were from ARCF I . However ARCF II still owns 59.5M warrants. So could it  possible that part of the remaining 12M warrants of the Jan 28 batch also belong to Arias?

[st_esteban]

I did not trace back all the warrants but in addition to the shares and related warrants from ARCFI in the Jan 28 release it was noted that: ARCF II    acquired 58,837,982 Units [= 29,418,991 warrants ] ARCF II Mexico acquired 3,338,301 Units [ =  1,669,150 warrants ] So in addition to the 13 million warrants from ARCFI the other two ARCFs had 31million warrants. The last

[kha341]

ARCF II and ARCF II (Mexico) have 59.5M warrants

[kha341]

West Family Investments Inc, owns 3.6M warrants of the Jan 28 2021 lot. And I think that at least Mark Smith owns some too.

[kha341]

As per my rough calculation ARCF II may still own around 4M warrants of the Jan 28 lot.

[st_esteban]

If this is the case the actual number of outstanding warrants that have not been redeemed yet for Jan 28 might be much less than 12 million. Last time the number of warrants was reported by Largo, that I am aware off, was in their 2020 Q3 results.  They reportd 25.5 @.29 with a date of Jan 28, 2021. In addition to the 13million redeemed by ARCFI on Dec, we could have some of the other

[kha341]

We are playing a guessing game here. With the recent huge volume perhaps MS, WFI and other non-insiders have already converted their warrants and we would not know because they don’t have to report their transactions. If they had done so then the impact of their action on the sp is negligible. In my guessing game I assume that the 12M warrants are still intact. But it’s just me. I try to guess by

[st_esteban]

Completely agree with you.  In the schema of things it does not really matter if there are 12million or zero warrants outstanding. What matters is that management has shown that they are able to take the right decisions that will benefit their shareholders.  this includes taking steps to list on one of the major US exchanges and working on the creation of a vertically integrated company

[kha341]

In my expectation the exercise of warrants will cause a dilution of around 15% in Q1-21. A considerable dilution not to be dismissed as a nothing burger. 

[kha341]

The other two ARCFs (ARCF II and ARCF II Mexico) just exercised 54.6M warrants on Feb 01 2021. It looks like they still have ~5M warrants to exercise. Note that Largo has 15M warrants with expiry date = Dec 2022 (strike price = C$1.15)

[kha341]

To be clear, the Q1-21 warrants are divided into 2 lots, one with Jan-29th expiry date and the other with March-2nd expiry date (strike price = C$0.29 for both lots). According to the Jan-29-2016 NR, Arias acquired 62.2M Units of the 1st tranche of the PP thus 31.1M warrants with expiry date Friday Jan-29-2021. According to the Mar-2-2016 NR, Arias acquired 91.2M Units of the 2nd tranche of

[jcw604]

Could it be that Arias acquired other Jan 29 warrants and that became the reason why he seemed to be able to over exercise?

[st_esteban]

This post only talks about the warrants for Jan 28.  Here we said that there were some 12 million warrants that potentially belonged to ARCF II and Mexico. In the early warning report (March 2016) it was announced that "Pursuant to the Offering, ARCF acquired 26,313,414 Units, ARCF II acquired 61,362,266 Units and ARCF II Mexico acquired 3,481,522 Units"  this results in an

[kha341]

26.3M + 61.4M + 3.5 =  91.2M Units  = 45.6M warrants for ARCF (all of them). These were acquired from the second tranche of the PP on March 3rd 2016. The March 3 2016 NR said: “Funds managed by Arias Resource Capital Management LP (the "ARC Funds") purchased an aggregate of 91,157,202 Units in the Second Tranche for gross proceeds to the Company of CDN$15,952,510.35.” In

[kha341]

Actually out of the 45.6M warrants with expiry date = March 1st 2021 (2nd Tranche), 13.15M were already exercised by ARCF in Dec 2020. So the remaining balance from that lot = 32.45M warrants. And yet ARCF exercised 54.6M warrants on Feb 1 2021. So the difference of 22.15 M had to come from the lot with expiry date = Jan 28 2021 (1st Tranche)

[kha341]

Should read: Actually out of the 45.6M warrants with expiry date = March 1st 2021 (2nd Tranche), 13.15M were already exercised by ARCF in Dec 2020. So the remaining balance from that lot = 32.45M warrants. And yet ARC Funds exercised 54.6M warrants on Feb 1 2021. So the difference of 22.15 M had to come from the lot with expiry date = Jan 28 2021 (1st Tranche)