We had another director buy on Friday I have just noticed, Philip Copeland laid out a cool $128k for 4m shares, increasing his holding by 30% to 17,378,755 (including rights).

He did it on 18 June, the day before the market sensitive presentation for the Henslow conference was released which is a bit of sensitive time I would have thought…

He paid 3.2 cents which is above the current price but below the 3.3 cent close on the day of the conference. So no real price advantage, but that’s not needed to get a call from ASIC.

Interestingly it was an “Off market trade”, so maybe that makes it ok, if the seller was aware of the presentation prior to the trade – maybe.

Well it’s nice to see he is putting money in, it’s a reasonable amount but I suspect Philip is quite well off. He is based in the US, so possible explains the off-market trade approach.

Either way the market continues to ignore the company, even after the Henslow conference. All the markets money seems to be going into CBA for some inexplicable reason!

Updated insider holdings:

Total shares including options = 693,404,667 (30Apr25 – Appendix 2A)

Disc: I own RL+SM

While we wait for quarterly sales and cash updates I will reflect briefly on the director change of notice (3Y) published on 6 June.

The CEO Wayne Jones bought 290,000 shares for $8,700 adding to his 58,860,410 shares already owned. Not a big purchase, but still note worthy given the price languishes around 3c, below the 5c of the recent debt conversion by Birkdale Holdings, the largest shareholder.

Wayne is not an ultra-rich person or on a ridiculously large salary and I suspect that well over 90% of his net wealth is XRG shares. So, this is still a bit of a sign of confidence, and I am sure it was also done to show confidence, but I see that as genuine.

I am not buying more XRG today due to it already being a large position for me and I don’t have free funds to deploy, but if I do free up some capital (waiting for price points to trim/sell some positions), I may be topping up a bit.

The key catalyst for price movement from here will be a sales update for Operator XR. I would welcome an increase in sales and I am sure the price would react positively, but would be happy for it to continue to grow at the same rate it has for the last year. 

It would also be good to see them exit FREAK, but I expect this to be neutral to both my view on value and the share price, but we will see. Positive or negative cash impacts of the exit will be important given the current cash balance and the business is yet to reliably operate with a positive operating cash flow.

At this point any news would be nice on sales or divestment. I suspect the market is waiting, particularly for any information on any TRUMP related impact to the business (positive or negative). Certainly not an overly promotional company to the market.

Disc: I own RL+SM

Debt Conversion (5/3/25)

Announcement from XRG that Birkdale Holdings (Steve Baxter, currently largest shareholder, former director) has offered to convert the $4.628m debt (just over half XRG’s debt) to equity at $0.05 a share (a 39% premium to the current price). An EGM is being called for 30 April for shareholder approval.

Well this re-sets the debt position, but it does so with the half of the debt I was not at all worried about. None the less it will make managing and renegotiating the remaining debt much easier and reduces the risk for the company substantially.

Debt was a key red flag – I would put it down to orange if this arrangement is supported. 

I am both pleased that the pricing of the settling of the debt is at a premium and that debt will now be less of an issue, but disappointed because if my thesis holds with XRG then even at the premium it will be extremely expensive for shareholders in the long run with the issue of 92.6m additional shares (about 14% dilution) at a price that I see as massively under the value of the company.

There will most certainly be a price spike on the opening – I see buy orders building above current sell orders already. I may result in a sustained re-rate due to the reduced risk on debt, so a price around 5c may be a near term normal.

Disc: I own RL+SM

Cheers @Magneto , thanks for compiling. They are small numbers except for Wayne (I suspect a very significant number for him) but it a small company and so I feel they still carry weight of conviction for the rest of the board also.

Here is the review of the Appendix 3Y's of director interests including rights and options with ownership based on fully diluted 628.9m shares/Options. Not sure where all the other options sit, there should be 66m according to the last Appendix 3H:

Also looking at the last AGM and the equity issues from that were high as set out below. Part of the reason was a stuff up in FY23 option issues which hadn't been correctly approved via AGM vote (rectification notice issued 26/4/24), so some catch up. Also, they have been conserving cash so the allocations don't seem unreasonable but something to keep an eye on once they don't need to save cash (it's a 2.5% dilution in total).

The other interesting thing out of the FY24 AGM was Resolution 4 which was the approval of a 10% placement of shares available to the board for the next 12 months. This is on top of the 15% capacity available under listing rules, so they have an ability to do a capital raise for up to 25% of shares on issue. Wayne has said they don't need to raise to operate, and their cash flow outlook supports this, but they may be looking at an acquisition and making sure they have the fire power to raise if needed. A good question to ask Wayne about if Andrew is able to tee up a meeting.

Buying pressure seems to have died today, the excitement from Alan Kohler's interview has been killed by the price rise it seems.

I am still working on a valuation, but there are to many moving parts to have anything beyond a 12 month view on how the Operator XR business will evolve. The FREAK business is up for sale as well, I haven't seen any carve out of that business so don't know the impact except it should be profit and cash flow neutral, but the balance sheet impact is going to be important.

If the Operator XR business continues to grow around current rates and Entertainment business remains flat, then I can't see the business being worth less than $100m in 2-3 years. Thats assuming no growth in the DoD opportunity, hence a lot of upside opportunity on that figure if they crack the augmented reality (as opposed to current VR) application the DoD is looking for as part of the current project.