Forum Topics General discussion
BullishTrader
2 weeks ago

Just new to this page, My main Favorite stock is CPV, Im also holding KTD, TTT, CFO, DOU, FOD, AL3, PRL, ESH.. As I think these will all trade higher.. I dont really know how to use this page or how people can see what I post, or how I can see what others are posting about. But Medium to long term , Im pretty confident the stocks Im holding will trade higher.. I dont even know If Ive posted this in the right place,

5
0
Reply
OutThere
3 weeks ago

Hi Strawman,

 

Maybe I didn't read the rules of the recent trading competition carefully enough but I was of the impression that the stocks we picked for that comp would be temporary while the comp ran and then we would start again.  So my approach during the comp was to leave it toward the end and then I chose some hot stocks that were moving at that time hoping to capitalise on very short term moves.

It seems looking at my profile that I now have these stocks for ever ... which I thougth we'd get a clean slate after the comp ...  

So I guess my question is - can we wipe them or do I have to trade my way out of the position I find my self in .... ? 

Thanks 

OutThere

 

 

1
0
Reply

Bear77
3 weeks ago

Hi @OutThere, to reset your portfolio, follow these steps: 1. Click on "My Account" (top right corner of Strawman.com home screen) 2. Click on "Account Actions" 3. Click on "Reset my Portfolio" 4. Follow the prompts (I haven't been past step 3 myself, so I do not know what is displayed next). Hope that helps.

7
0

Carbonite
3 weeks ago

Based on the NTA released on Friday, WGB is now trading at a premium, so the options are (as of Jan 31), NTA is slightly positive rather than negative. NTA was stated as $2.50, strike price is $2.54. In other words, you would be exercising options at a premium to NTA which, on top of everything I mentioned above, makes them even less attractive. I've sold and will only watch for curiosity value on March 11 and May 31. I would only re-enter under these conditions: 1. The price drops well below $2.54 AND the NTA discount returns, or until: 3. The options either expire (late 2022) or are mostly exercised and off the market (unlikely).

8
0

OutThere
2 weeks ago

Thanks a lot Bear77

4
0

I don’t own WAM Global shares but am curious to what others think about today’s announcement of bonus options. A few questions it raised for me were..

The purpose of the bonus issue per the announcement was to “increase it’s relevance in the market, improve the prospect of broker and research coverage, and gain additional interest of financial planners”.

Do you think WAM Global is really lacking in the above?

Another reason is “to reduce the fixed expense ratio of the company”.

WAM Global currently is more than $500 million in size, do you think that poses problems for it’s fixed expense ratio?

Would becoming a much larger LIC potentially prevent it from getting set in great smaller opportunities, i.e. do they become less “nimble” with their trading in the future as a result?

Is potentially doubling the size of the supply of units bullish for the price of the asset I own?

If I don’t have the money or willingness to take up my bonus options, will I get a fair price if I have to sell them on market?

Investors who wanted to invest more in WAM Global, has there even been anything stopping them of late given a normal discount to NTA, is a bonus plan necessary?

Who is the real winner from this supposed “win / win” deal?

Lastly here are some older links on this debate..

Nothing ‘Free’ About LIC Options - Forager Funds

Are free LIC options too good to be true? - ETF Watch

Do LIC options provide investors with value? (firstlinks.com.au)

 

 

7
0
Reply

Carbonite
3 weeks ago

I personally hate options on LICs and this one is a little different - but it's only marginally better. This is really a capital raise (technically all options are). The two key differences for WGB are the options are already in the money based on today's close (option strike price $2.54 versus $2.60) and the entitlement date for the shares is in March 11. Normally an option's strike price ($2.54) for LICs is above the current price which results in share price stagnation as investors convert the options over to shares once the the strike price is exceeded. However, in this case the options are already worth 6 cents (plus a little more for the time component), but I expect this premium will vanish on March 11. That entitlement date means trading until the ex-date should see the share price rise - as it did today - because the option component is still attached. Of course, on the ex-date, I would expect to see a fall to around $2.54. So what are the reasons? First Wilson gets a larger amount of funds to manage, therefore a greater fee. In theory for investors it means WGB have extra cash to invest. It will bring down the NTA slightly depending on the difference between the option strike price and the shares, plus when the options are exercised. So assume $2.60 NTA and $2.54 strike, with all options exercised the new NTA will be $2.57. Not exactly a great dilution of NTA but the reduction in cents of the NTA will be greater if the NTA is larger. But the big dilution comes in profit reserves, which will drop. This would be a halving of reserves from ~4 years to ~2 years if all options were exercised tomorrow but is more likely to be smoother (and less) as there is an 18 month time-frame for the options. If WGB invests the new cash, it should start seeing a contribution to profit reserves. So if people exercise the options in March and Wilsons invests that cash with a positive return it will help bolster the profit reserves. But the timing is interesting. I would, in theory, expect the price of WGB to drop on March 11. So at that point you have 1 share plus 1 option. If the price then gets capped at $2.54 due to the options, as LIC history suggests it will, the bigger issue with the options comes when WGB goes Ex-div on May 31st. This will see it fall 5 cents on that day. If WGB is trading at $2.54-2.61 or less the day before ex-div, it will wipe most of the value off the options as the share price will probably fall to $2.54 or less and the options will drop in value to 1-2 cents. If WGB stagnates at $2.54 before ex-div, this could see the shares drop to $2.49 and it becoming harder to see value in options above 1 cent or so. This is all speculation of course, but it is based on LIC options history. It's tricky to work out what will happen on March 11. My guess is we end up with shares at $2.54 plus options worth 1-2 cents with a price cap for WGB lasting 18 months. The only saving graces will be if WGB can pile on both the NTA and divs.

8
0

Thanks Carbonite sounds like you are mostly in agreeance in these LIC options not providing a great deal of benefits to shareholders. When you say there are 2 key differences, I don’t seem them as being all that much different. In terms of share price exceeding option strike price I don’t see that as being much different to option issues in the past. What I mean by that is firstly at the time they released the announcement, the share price was basically 2.54 also. It was only later on that they hit 2.60. They decided to have an option strike price the same as the share price at the time. A bit like in the old LIC IPOs where they would set the IPO price $1, quite often this matched the option strike price. The other difference about allowing shareholders time to buy in to get the option also kind of existed with IPOs. That is those that go in the float get the options, then when they start trading new buyers do not get such options. Kind of like here when around March 10 they trade ex the options entitlement. Very good point you make also about potential halving of existing profit reserves and franking credits when measured per share, I didn’t cover that in my earlier post. When you talk about only diluting the NTA slightly you are referring to a hypothetical if the NTA is around 2.60 at the time. In that case you are right, not much dilution. However these options can be exercised at any time until expiry up to September 12, 2022. That is a long time away so if the bull market keeps running and their portfolio NTA surges to say $3.50, how about the dilution then from doubling the share count issuing cheap shares at $2.54? Whilst it is in WAM Global’s interest to talk up exercising your options as soon as possible and rush in before a dividend, many options will still exist up until September 2022. You might be right about some share price weakness around March 11. I won’t try and predict what might happen because I am still seeing WGB shareholder excited over their “free gift” in this announcement. On another forum some seem to believe WGB has magically created about 20 cents of extra value overnight with this deal. That is why LICs do this I suspect, they are well aware many small shareholders have never heard of dilution, so they can potentially capitalize on this. I find it a tricky situation to guess share price movements with WAM LICs generally as I never would have imagined WAM / WAX stay so long at circa 30% premiums. Anything is possible here with WGB!

7
0

Carbonite
3 weeks ago

@stevegreenycom I was only using the $2.60 NTA as a hypothetical and mentioned the NTA drop will be larger if the NTA rises. It really depends on when the options are exercised. If it is gradually over time, then it will limit the NTA drop (unless there is a massive NTA bump before March 11). It would seem a lot of Wilson funds are bought by retirees with little understanding of LICs. You can see this across all funds as the higher the div, the higher the premium. I don't think those driving up the price now realise the implications. The issue about timing versus IPO is that to cover the float costs, a new LIC will offer options to offset the fact the NTA is slightly below the float price. This time it's a little different as the entitlement date is in the future and currently in the money which creates a false sense of easy money. I can't see how flooding the market with the options is going to help the share price post-March 11 as there will be too much selling pressure above $2.54 Maybe WGB will breeze through the ex-bonus date unscathed but that will mean the options being exercised and new shares being sold will drive down the price towards $2.54. Regardless I've sold out of WGB at a reasonable profit as the options create uncertainty around future pricing.

6
0

Yes I see now @Carbonite originally you were quite clear about potential NTA dilution could be greater if NTA rises, I read it too quickly the first time. Good to get some feedback from someone who owns and understands it. I don't blame you for selling as it seems to me strange the shares bounce from 2.54 to 2.63 quickly off the back of this announcement. Since the announcement global markets are softer if anything, and it doesn't appear to me that this deal magically creates value for shareholders.

6
0

Dominator
3 weeks ago

I was previously an investor in WGB but no longer invested. I hold WMI. I think the biggest winner out of this proposal is Wilson rather than investors. I hope they provide monthly NTA on a pre-diluted and post-diluted basis until all options are exercised or expired. I doubt this will be the case as Wilson don't provide performance based on after fee return or NTA return but the underlying fund performance before these costs. This is something I really detest about Wilson as it significantly inflates the real return investors can expect. I keep my own spreadsheet of monthly NTA to judge actual performance. If you would like to see the effect of options take a look at Ryder capital LIC (ASX:RYD) (I own for disclosure). You can find monthly NTA data here http://rydercapital.com.au/nta/ . I am an investor well below option price so I was happy if they made it to the point I would get diluted. Currently, if all options were exercised their would be approximately a 38% increase in shares on issue (compared to WGB's 100%). Looking through the monthly NTA reports of Ryder you can see the large effect of dilution that occurs as the NTA extends well beyond the strike price of the options. Given WGB's larger option issue this effect will be more pronounced this will have a negative impact on actual returns. I would want to know if the way Wilson report's their returns will indicate this dilution (in terms of portfolio return figures not NTA price). I think the gold standard is Magellan. They are providing an option for 7.5% discount to NTA at time of exercise. The discount is fully funded by Magellan themselves as to not dilute the unit holders.

4
0

Mossy
3 weeks ago

I bought some WGB when at a big discount a couple of years back. If its one thing Wilson is good at it is closing discounts, so I thought it was a pretty safe bet. The discount closing and little bump on the announcement gave me a great reason to exit. Wilson has amazing talent at making his loyal band of boomer followers believe he is always acting in their best interest. This announcement timed at what may be the peak of one of the greatest bull markets in recent history, a couple of months out from a dividend will get them excited and we'll highly likely see a huge chunk of these options exercised in time for the next dividend which plays into his strategy perfectly, as it reduces the risk of a correction making the options expire worthless and not increasing his market cap. He's entitled to try to raise more capital, but attempting to double the market cap is just greedy in my opinion, and share holders will suffer over the next 18 months. I wasn't happy being in one of his funds after the hoo haa he made about franking credits last election, so this provided me with a great exit point.

6
0
Strawman
2 years ago

Hi Bear77 -- in reply to your question posed posted on your report (here).

The LICs that are found on Strawman depend entirely on what our data provider (Morningstar) have elected to include. We do not manually elect to include some and exclude others.  I agree it is frustrating, and we're working towards a solution that should resolve this issue, and others we have encountered.

1
0
Reply

Bear77
3 weeks ago

Just found this reply from you (to me) from 2 years ago Strawman. Looks like you found the solution by replacing Morningstar with another data provider. You appear to have all of the LICs on board Strawman.com now, just not the ETFs. Any idea when the ETFs will get added?

3
0

Strawman
3 weeks ago

It's been on the list for a long time, but we'll increase the priority as others have requested this too. I'd say we'll get ETFs added to Strawman in the next month or so.

14
0