There seems to be some confusion on the $YCA #uranium option - how to exercise, order of events, some idea of a credit line?!?
Here is a short thread on how it would work:
1) Yellowcake management submits an exercise notice to $KAP signaling an intent to raise capital to buy U
Here is a short thread on how it would work:
1) Yellowcake management submits an exercise notice to $KAP signaling an intent to raise capital to buy U
2) KAP has some time period to respond with an indicative price which is then verified by $YCA management as "market" when compared to third party price reporters
3) Once a price and indicated size is agreed upon, THEN management has a couple weeks to raise capital in the market
3) Once a price and indicated size is agreed upon, THEN management has a couple weeks to raise capital in the market
What is key here is that by the time the market is aware of a transaction, the indicated size and pricing has been set (if you think about it, a requirement to raise before pricing is set would never make sense - the market would move on your raise).
4) $YCA would then raise the capital on a best efforts basis and use the amount successfully raised to buy pounds from $KAP. While not fully disclosed, I would assume that they lose the option amount of anything they exercised but could not raise (cannot repeat this process)
5) Next, $KAP has some significant leeway in terms of setting a delivery schedule (so it is not as if they would likely be "caught short") - rather, the option exercise would impact how they manage inventories and sales through the year, so an exercise is actually good for $KAP .
My understanding is that $YCA has exercised their option when the initial notice is submitted (not pounds delivered), so in theory $YCA could exercise on 12/31/20 and then have another $100mm option starting in 2021. This is a lot of material to source in a thin market.
IF I were management, understanding that the option in valuable in todays market, this is exactly what I would be trying to do. Exercise the 2020 and leave the additional option value for shareholders in 2021.
No credit line needed due to the order of operations of exercise
No credit line needed due to the order of operations of exercise
Just clarified this point with the company. If they are unable to raise the full exercise amount they do not "lose" the option. Meaning they can keep trying throughout the year up to $100mm. Means management has very little to lose by attempting the option.
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