Could MM explain MFG’s options proposal?

Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.

Ask a question

The Latest Q&A

Question asked 02/04/2022

Could MM explain MFG’s options proposal?

Dear James, I appreciated your recent update regarding the BHP - WPL demerger, if that's what it is called, and am requesting you do the same regarding MFG and their proposal to issue options to share holders. Can't seem find any information on this, when it is proposed to happen, how it will work etc..

Answer

Hi Peter,

MFG are issuing options to staff and shareholders in an attempt to stem the panic like selling of the stock. We particularly like the issue to staff as it looks to create some staff loyalty albeit with potential dollars.

As to the shareholders, the issue is being done on a ratio of 1 for 8, so every 8 shares held will attract a free option. Each Option will provide shareholders with the right, but not the obligation, to purchase one Magellan share at an exercise price of $35.00 per Option, expiring on 16 April 2027.

You will need to own the shares on the 6th April to then be issued with the free options which will take place on the 14th April. The options will trade on the ASX under code MFGO, so at any time these can sold by holders. From what I can tell, these will only be worth a few cents, maybe 5-7c at best initially. but will be another way of playing a potential rebound in MFG.

chart

Magellan Financial Group (MFG)

LAST UPDATED 01/04/2022 15:48

Latest Reports

Afternoon report 23/04/2024

The Match Out: Gold and Oil left behind again, Equities tick higher

Investors continued the 180-degree about-face from last week's sentiment, happy to take on risk for the second consecutive day to start this week seeing the ASX200 through a 200pt gain from Friday’s panic lows early in today’s session. Tech was the standout as US 2yr yields retreated (marginally) from the spike above 5% last week while Healthcare and Financials also joined in the rebound. Energy and Gold were the main areas finding it tough again today, for the same geopolitical reasons as Monday’s session.

Morning report 23/04/2024

What Matters Today: Are Macquarie & now Citi correct that the banks are a sell?

On Monday, Citi joined Macquarie with a “sell call” on the major banks, which saw the sector reverse early gains to close near their intra-day lows, ANZ even slipped into negative territory. There were two major reasons behind their bearish stance: • Citi believes the valuations of the banks are stretched considering the potential political “attacks on their profits”, i.e. when the RBA starts cutting, they will be forced to follow suit at the expense of profitability. • Macquarie said to “sell” the banks in mid-March as the sector posted new highs, again a call on valuation grounds; good timing so far! The cornerstone of Citi's argument is valuation, which could be applied to the whole market when the ASX200 is challenging new all-time highs. Overall, it is an understandable view, but we question if it's a good enough reason to exit the sector, forgoing enticing dividends and potentially incurring capital gains issues after the “Big Four” have run so hard.