In my last article, Camac Energy Just Boosted Shareholder Value, I highlighted the work that Camac (CAK) had done in buying out the interest in the OML 120 and 121 fields and the new US$270 million equity investment from the Public Investment Corporation (SOC) Limited of South Africa. However, the one portion that I failed to include is the Share Dividend being issued:
In order to achieve the post-closing share ownership percentages negotiated between the parties, the agreement with Allied requires the Company to declare a dividend in the form of additional shares of CAMAC Energy common stock, equal to approximately 1.435 shares per share outstanding. The declaration of the stock dividend will not occur if the conditions to the transactions are not fulfilled. As a result of the Allied and PIC transactions and the issuance of shares pursuant to the anticipated stock dividend, Allied and CEHL will own approximately 56.97% (or approximately 57.15%, including the shares owned by individuals controlling Allied and CEHL) of the outstanding common stock of the Company, PIC will own approximately 30% and the existing public stockholders of CAMAC Energy not affiliated with Allied or CEHL will own approximately 13.03% (or approximately 12.85%, excluding the shares owned by individuals controlling CEHL and Allied). The percentages exclude the 69,793,411 shares into which the subordinated note will initially be convertible.
Doing the Math
So here is how it breaks down, based on both the numbers presented and the percentages.
Here is the pre-announcement breakdown of the shares on 8 November 2013. I was not able to find the exact numbers, but this is close based on disclosed ownership of CEHL. The total shares is what was published in the 3Q13 press release:
After the shares are issued to CEHL and PIC, here is what ownership will look like:
Again, the percentages are what were stated in the press release, and the total came from information supplied by the company. The shares of PIC were also provided in the press release, so the number of shares going to CEHL and the Public are based on the math. So here is how investors go from 67,335,243 shares to 163,693,467 shares:
As an investor, if you owned 1000 shares, after the dividend date, you will own 2435 shares. So there are a couple of ways to look at this as an investor. The first is that after the shares are distributed, you will have increased your ownership of the company by 143%. The second is the value of your shares. Prior to the announcement, public investors owned about 43% of a company with a market cap of about $150 million, or about $64 million worth. After the dividend, investors will own 13.03% of a company worth about $900 million, or about $117 million. Another way to look at it is the cost basis at where the shares were acquired. Suppose an investor acquired 1000 shares on October 1st when the stock was trading at $.80 for $800. When the dividend shares are awarded, that investor will now have 2435 shares that he paid $800 for, and will have a cost basis of $.33 per share.
The last question that remains is the date of the dividend. With the holidays approaching, investors should expect an announcement with a date sometime after the first of the New Year. This will give investors a chance to load up on shares prior to the date.
As part of the deal, Allied Energy Plc has the option to convert the US$50 million promissory note for 69,793,411 shares. If they elect not to convert, the additional shares will not be issued. If they choose to convert, the US$50 million note disappears. This deal will be a huge reward to those that had the foresight to buy when the price sat under $.50. For those that still want to get in, the company has huge upside with developments it is making in Nigeria, The Gambia, and Kenya. The next big market move for this company will be the announcement of a partner being brought in.
Disclosure: I am long CAK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.