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Miami co

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Miami co

  • This topic has 3 replies, 2 voices, and was last updated 3 years ago by John Moffat.
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  • November 20, 2021 at 11:37 pm #641203
    humai
    Participant
    • Topics: 757
    • Replies: 248
    • ☆☆☆☆☆

    Sir in Miami co J13 Qs, in examiner answer its written that current value of the unsecured bond is estimated at $56•8m (appendix 4) and if the unsecured bond holders are to be offered a 10% equity stake in Mlima Co post-listing, then only the share price at $5•86 would be acceptable to them. (This I have understood)

    If the listing is made at the lowest price of $4•51/share, then they would need to be offered around a 12•6% equity stake (This I am not getting in my head). Can you please explain?

    November 21, 2021 at 8:34 am #641224
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54655
    • ☆☆☆☆☆

    The bond holders have to be given shares worth in total $56.8 million.

    If they are given 10% of the 100M shares then they would be given 10M shares and the share price would have to be 56.8M/10M = $5.86.

    However if the share price is $4.51 then they would have to be given 56.8M/4.51 = 12.59M shares.
    Since there are 100M shares being issued in total, this would mean given them a 12.59/100 = 12.59% stake rather than a 10% stake.

    November 22, 2021 at 6:19 pm #641339
    humai
    Participant
    • Topics: 757
    • Replies: 248
    • ☆☆☆☆☆

    100M shares and 10M shares are number of shares na?

    November 23, 2021 at 8:52 am #641362
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54655
    • ☆☆☆☆☆

    Yes. They are issuing 100M shares in total. A % of those shares will be issued to the bond holders.

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