What should be done with Bonus Options?

[mars_atom]

Hi,

MXR has offered bonus options.

What are they exactly?
Where can I find information about them?
Why did the share price go down? Will it make up the drop quickly?

What should be done, or what do I need to do?
What choices are available and if there is more than one, what is the better choice to make?

Please explain.
Looking forward to some clarification on this topic.

Thanks




An excerpt from their announcements is included below:

HIGHLIGHTS
• 1 for 2 Non-Renounceable Rights Issue at 20 cents per share to raise $9.48
million
• Patersons Securities Limited to act as Lead Manager and intends to
underwrite the Rights Issue
• After the Rights Issue, eligible shareholders will be entitled to one (1) free
Bonus Option (exercisable at $0.20 before 30/6/09) for every five (5)
shares held
RIGHTS ISSUE
Shareholders will be given the opportunity to subscribe for shares pursuant to a Non-
Renounceable Rights Issue on the basis of one (1) share for every two (2) shares held at
the record date at an issue price of 20 cents per share.
The record date for the Rights Issue is to be advised.
The Rights Issue will raise

 

[thewahaman]

Hey I'm in the same boat. New to the wonderful world of stocks (and hence this forum), been dabbling here and there for the last 2 months and really learning from the experience. Today MXR has delivered me a nice big kick in the guts and I'm trying to understand how the whole bonus options thing works too.

Thanks

 

[powerkoala]

the simple explanation is like this :
the company is needing money for operational things such as exploration, drilling, etc.
they are running out of cash, and now trying to borrow money.
in this case (MXR), they are offering shareholders to buy renounceable issue share at the price $0.20c for every 1:2 shares they are holding.
if they buy, then for every 5 shares they will get a 1 bonus options exercise at 20c each.
why sp down? because at the current price of 33c, 20c issues is consider low. almost 40% discount.
also with new shares later to be allocated, the shares on issue will be almost double than now.
hope this explains.
regards

 

[Whiskers]

...in this case (MXR), they are offering shareholders to buy renounceable issue share at the price $0.20c for every 1:2 shares they are holding.

I expect you made a misprint, powerkoala.

That would be non-renounceable share issue

Non-renounceable issue: you cannot sell your rights to them. If you don't take them up, they cancel.

Renounceable issue: you can sell the rights to them.

 

[powerkoala]

I expect you made a misprint, powerkoala.

That would be non-renounceable share issue

Non-renounceable issue: you cannot sell your rights to them. If you don't take them up, they cancel.

Renounceable issue: you can sell the rights to them.

oh... thanks for that...
to excite writing and watching SP falling down makes me do that
cheers.

 

[nomore4s]

the simple explanation is like this :
the company is needing money for operational things such as exploration, drilling, etc.
they are running out of cash, and now trying to borrow money.
in this case (MXR), they are offering shareholders to buy renounceable issue share at the price $0.20c for every 1:2 shares they are holding.
if they buy, then for every 5 shares they will get a 1 bonus options exercise at 20c each.
why sp down? because at the current price of 33c, 20c issues is consider low. almost 40% discount.
also with new shares later to be allocated, the shares on issue will be almost double than now.
hope this explains.
regards

Just to expand a bit on this.

The bonus options, are like a loyalty bonus for holding the shares (as well as helping the company raise more money down the track).
In this case for every 5 shares you hold you will get 1 option so if you hold say 1000 shares you'll get 200 options. Now the options will have an expiry date and a strike price, in this case the expiry date is 30.06.09 with a strike price of 20c. What this means is that you need to convert the options to full shares before the 30.06.09 or else the options will expire and be worthless, to convert the options it will cost you 20c per option (raising more money for the company). The options should also trade on the market under something like MXRO, if MXR is trading at around 25c the options will normally trade at about 6-8c but there are a few factors that will affect this.
Ok, the advantages of options (especially because in this case the options haven't cost you anything) if come expiry time MXR is trading for 30c you can convert your options and end up with shares that have only cost you 20c each, this also gives the company added incentive to get the sp up over 20c as they will raise more money when people convert thier options. Also as stated above you can trade the options (MXRO) so you could decide to get rid of them after you get your allocation, if say MXR is trading at 30c sometime in the future and MXRO is at around 12c you may choose to offload your MXRO at 12c (they cost you nothing) making a profit. You could also choose to buy more MXRO if you think the company has good future prospects doing this will give you more leverage, as the options price will normally follow the heads. E.g MXR goes up 5c MXRO will normally go up 5c as well. Hope that clears things up, I'm in a bit of a rush so it might make no sense at all.

 

[mars_atom]

Hi,

Thanks for the responces.

Just to clarify a couple of points:

"if they buy, then for every 5 shares they will get a 1 bonus options exercise at 20c each.
why sp down? because at the current price of 33c, 20c issues is consider low. almost 40% discount.
also with new shares later to be allocated, the shares on issue will be almost double than now.
hope this explains.
regards"


Does that mean that I would get 1 bonus option for every 5 shares I currently possess plus the shares I can purchase now at 20c?
Or does it mean 1 bonus option for every 5 shares I purchase at 20c and does not include my current shares?



cheers,

 

[powerkoala]

Hi,

Thanks for the responces.

Just to clarify a couple of points:

"if they buy, then for every 5 shares they will get a 1 bonus options exercise at 20c each.
why sp down? because at the current price of 33c, 20c issues is consider low. almost 40% discount.
also with new shares later to be allocated, the shares on issue will be almost double than now.
hope this explains.
regards"


Does that mean that I would get 1 bonus option for every 5 shares I currently possess plus the shares I can purchase now at 20c?
Or does it mean 1 bonus option for every 5 shares I purchase at 20c and does not include my current shares?



cheers,

Or does it mean 1 bonus option for every 5 shares I purchase at 20c and does not include my current shares?

that's your answer
cheers