Sibanye Gold (SBGL) is trading “ex-rights” today, so you will see your shares trading about 35% lower from yesterday’s close.
Your existing good-till-canceled sell-stop at $6.89, should have been adjusted lower by your broker to approximately $4.19 to reflect share dilution.
This is part of the terms for its $1 billion rights issue which will help the company finance the $2.2bn takeover of Stillwater Mining. Here are some of the details:
“Sibanye Gold Limited (“SBGL”) has announced a distribution of transferable Rights to SBGL Shareholders of record April 7, 2017. The distribution will be made at a rate of 1.285714 Rights for each one (1) share of American Depositary share (ADS) of SBGL. Fractional rights will not be issued, and ADS right entitlements will be reduced to the next smaller whole number of ADS rights. One (1) right entitles the holder to purchase one (1) new ADS of Sibanye Gold Limited per whole Right at an exercise price of $3.48 cash ($3.43 subscription price per ADS plus the Depositary fee of $0.05) per ADS. The Rights will expire at 5:00 pm New York City Time, on Tuesday, June 6, 2017, unless extended. The SBGL ADSs will be quoted “ex-rights” on Friday, May 19, 2017.”
We still believe in the fundamentals of SBGL and believe the merger with Stillwater’s assets will make for a stronger, lower-cost miner going forward.
We also recommend that you take advantage of the rights offering, especially since the acquisition is already baked into the stock price.
The first step is to contact your broker to move forward with the offering. The exercise period begins on Wednesday, May 24, 2017 and ends on Tuesday, June 6, 2017. So please make sure you contact your broker before the rights offering expires. You don’t want to miss out.
By exercising this rights offering, you have the opportunity to add shares of SBGL at a sizable discount to the market.
Here’s what the transaction will look like:
We’re currently tracking 150 shares of Sibanye in the E-Wave Trade Portfolio at an entry level of $8.75.
By exercising the rights offering, you’ll purchase an additional 193 shares (150 * 1.29) at a price of $3.48.
The combined transactions provide an average entry cost of about $5.79 per share.
Remember, you will need to have enough cash in your account to cover the cost of adding these additional shares.
In other portfolio news, you should have been stopped out of ProShares UltraShort Euro (EUO) this morning when it hit our recommended protective sell stop at $24.14.
That’s unfortunate, but that is what stops are for, to limit the risk.
Continue to hold all other positions. More market updates are coming soon.
Good Investing,
Mike and David
