The proposed share issue of 10.5 cents a share is, however, at a deep discount to the NAV of 19 cents a share.
The SGX queried Trendlines on 27 Sept. Trendlines' response, released today, makes for interesting reading. (For the 8 SGX queries and Trendlines' response, click here). Below we republish two of the queries and the response.
SGX Query 1
What is the rationale behind proposing the Rights Issue at an issue price which is at a premium (19.3%) to the last traded price? What is the incentive for shareholders to subscribe for the Rights Shares when they can purchase shares from the market at a lower price?
The Company believes that the current market price of Trendlines does not properly reflect the Company’s value.
|For background, read: TRENDLINES: Attracts S$11 m investment by London billionaire (who will become No.1 shareholder)|
A share price of S$0.1050 (“Rights Issue Price”) would more closely approximate the Company’s value as it was supported by a recently completed private placement to Librae Holdings Limited (“Librae”) at S$0.1050 per share (“Placement”), which represented a premium of 34.6% over the VWAP and last traded price of the full market day prior to the date of the subscription agreement.
The Board is also of the view that the relatively substantial shareholding stake of 14.55% in the Company resulting from the Placement (at a premium over the Company’s VWAP) demonstrates the belief and support of Librae in the Company and its prospects. In addition, following exploratory talks with some of the Company’s substantial shareholders, including Librae, the Company had received a commitment from Librae to participate in a rights issue at the same price as the Placement.
Notwithstanding that the current market price is lower than the issue price for the Rights Issue, the current average trading volume of the Company’s shares is low and shareholders who wish to obtain further equity participation in the Company may not be able to purchase the shares from the market at the current market price.
With the Rights Issue following the Placement, the Board structured an opportunity for other existing shareholders of the Company who may be interested to obtain further equity participation in the Company to participate in the Rights Issue, and that such further equity participation should be at a price no less than the Placement price.
In addition, the Board had also noted that following the Company’s private placement exercise in October 2017, the Company had received feedback that existing shareholders should also have the opportunity to participating in fundraising exercises by the Company.
|SGX Query 3
The Company has stated that there is no minimum amount to be raised for the rights issue. Notwithstanding, Librae will be providing an Irrevocable Undertaking to subscribe for its entitlements and excess rights shares (in aggregate, the “Undertaking Shares”).
The Undertaking Shares represent 100% of all the Rights Shares to be issued under the Minimum Subscription Scenario, and 92.8% of all the Rights Shares to be issued under the Maximum Subscription Scenario.
(a) As set out in the response to Query 1 above, the Company had held exploratory discussions with some of its substantial shareholders, including Librae, to assess the viability of a rights issue exercise at the Rights Issue Price as a rights issue exercise will consume considerable resources and funds. In this regard, the Company had also considered the possibility of negative market perception in the event of a failed offering. Following such exploratory discussions, Librae had agreed to provide the Irrevocable Undertaking.
(b) The Company is unable to make representations on behalf of Librae. However, following the Placement and in the course of the exploratory talks, Librae had indicated that it wished to increase its investment in the Company as it believes in the prospects of the Company, and further, understands that providing the Irrevocable Undertaking in the Rights Issue will ensure the success of the Rights Issue.
(c) The Board had considered several scenarios, including another placement before deciding to undertake the Rights Issue. As set out in the response to Query 1 above, the Company had also taken into account feedback from shareholders following the Company’s private placement exercise in October 2017 that the existing shareholders would like to have opportunities to participate in fundraising exercises by the Company.
About The Trendlines Group
Trendlines is an innovation commercialization company that invents, discovers, invests in, and incubates innovation-based medical and agricultural technologies to fulfill its mission to improve the human condition. As intensely hands-on investors, Trendlines is involved in all aspects of its portfolio companies from technology development to business building. Trendlines’ shares are traded on the Singapore Stock Exchange (SGX: 42T) and in the United States as an American Depositary Receipt (ADR) on the OTCQX (OTCQX: TRNLY).