Versarien plc (LON:VRS), the advanced materials engineering group, has today provided further examples, following press comment, in respect of the subscription and sharing agreement with Lanstead Capital Investors LP, announced on 23 March 2020 and re-iterate the terms thereof in order to aid shareholders understanding and further information on the China joint venture.
Terms defined in the Lanstead Announcement are used throughout this announcement, unless otherwise advised. No new information is contained in this announcement other than the table below with examples of proceeds receivable pursuant to the Share Agreement at different prices for the ordinary shares of Versarien based on the Lanstead Subscription price of 40 pence per share (being an approximate premium of 2.5% to the Versarien volume weighted average share price in the 20 days prior to the Lanstead Announcement), and the issue price of the Value Payment Shares issued to Lanstead.
Following receipt by the Company of £6 million of gross funds from the Subscription, all of the proceeds were pledged to the Sharing Agreement. Accordingly, and as previously stated, the proceeds of the Subscription were only available for use by the Company for entering into the Sharing Agreement. Consequently, the Company will receive cash settlements from Lanstead over a period of 24 months, commencing in approximately two months, and the amount of proceeds to be received is wholly dependent on the share price performance of the ordinary shares of Versarien each month over the term of the Sharing Agreement.
As outlined in the Lanstead Announcement, shareholders should note that the Company also issued to Lanstead 750,000 Value Payment Shares as consideration for entering into the Sharing Agreement, such shares having been issued at a price of 40 pence per share.
The Sharing Agreement provides that the Company will receive 24 monthly settlement amounts as measured against a benchmark share price of 53.33 pence per Subscription Share, a premium of approximately 33.33%. Notwithstanding the Subscription Price of 40 pence, shareholders should note that the share price of the Company needs to be on average over the 24 months of the Sharing Agreement at or above the Benchmark Price of 53.33 pence per share for the Company to receive at least, or more, than the gross Subscription proceeds of £6 million.
If the Measured Price, calculated as the volume weighted average share price of the Company’s ordinary shares over a period of 20 trading days prior to the monthly settlement date, exceeds the Benchmark Price, the Company will receive more than 100 per cent. of that monthly settlement due on a pro rata basis according to the excess of the Measured Price over the Benchmark Price. Should the Measured Price be below the Benchmark Price, the Company will receive less than 100 per cent. of the monthly settlement calculated on a pro rata basis and the Company will not be entitled to receive the shortfall at any later date.
For example, if on a monthly settlement date the calculated Measured Price exceeds the Benchmark Price by 10 per cent., the settlement on that monthly settlement date will be 110 per cent. of the amount due from Lanstead on that date. If on the monthly settlement date the calculated Measured Price is below the Benchmark Price by 10 per cent., the settlement on the monthly settlement date will be 90 per cent. of the amount due on that date. Each settlement as so calculated will be in final settlement of Lanstead’s obligation on that settlement date.
Assuming the Measured Price equals the average Benchmark Price on the date of each and every monthly settlement, Versarien would receive aggregate proceeds of £6 million (before expenses) from the Subscription and Sharing Agreement. If the Measured Price is less than the Benchmark Price on the date of each and every monthly settlement, Versarien would receive aggregate proceeds of less than £6 million (before expenses). If the Measured Price is more than the Benchmark Price on the date of each and every monthly settlement, Versarien would receive aggregate proceeds of more than £6 million (before expenses).
In order for shareholders to further understand the possible outcomes from the Sharing Agreement, the Company is pleased to set out below some examples of the amount of proceeds that it would receive in a monthly settlement from the Sharing Agreement, depending on the 20 day average volume weighted share price of the ordinary shares of Versarien in the period prior to the settlement:
| Measured Price (20 day volume weighted average share price) | Monthly gross proceeds #2 | Approximate monthly net proceeds after all costs #3 |
| 80 pence | £375,000 | £352,000 |
| 60 pence | £282,000 | £261,000 |
| 53.33 pence #1 | £250,000 | £230,000 |
| 40 pence | £188,000 | £170,000 |
| 20 pence | £94,000 | £78,000 |
#1 the Benchmark Price for the Sharing Agreement
#2 being the number of Subscription Shares multiplied by the Subscription Price multiplied by the Measured Price divided by the Benchmark Price (being a premium of 33.33% to the Subscription Price) and divided by 24 settlements
#3 assuming this is the average Measured Price over the 24 months of the Sharing Agreement
The proceeds receivable by the Company over the 24 month duration of the Sharing Agreement will be net of the cost of £300,000 incurred by the Company in entering into the Sharing Agreement with Lanstead, satisfied by the issue of the Value Payment Shares to Lanstead, approximately £30,000 of other costs incurred by Versarien in connection with the Subscription and Sharing Agreement, together with advisory fees paid to a third party adviser to Versarien of 2.5% of the amounts received under the Sharing Agreement.
By way of illustration, if the average Versarien share price over the duration of the Sharing Agreement equates to the Benchmark Share Price (an approximate 5% premium to the closing mid-price of the Versarien shares on 3 April 2020) the gross proceeds received by Versarien from the Sharing Agreement would be £6.0 million and the proceeds net of all costs and fees would be approximately £5.5 million.
The Directors believe that the Sharing Agreement provides a number of benefits to Versarien and its shareholders including: the certainty of near term income, albeit the quantum is dependent on the Versarien share price; the opportunity to benefit from positive future share price performance; and that the amount of shares issued are fixed, together with the cost of their issue.
Whilst theoretically the Company could have potentially raised a greater sum of money per share issued from a future placing of shares if the share price rises above the Benchmark Price, when compared to the proceeds from the Sharing Agreement, this would be dependent on a number of factors such as the willingness of investors to participate in any placing, the ability to achieve a placing at an appropriate discount and the ability of the Company to limit the costs of any such placing. The Directors believe that the proceeds the Company will receive from the Sharing Agreement with Lanstead significantly outweigh the risks associated with any such theoretical placing, the uncertainty of when such a placing may be possible and the uncertainty of achieving a positive outcome.
Further information on China joint venture
Versarien is pleased to provide further information in respect of the joint venture agreement with Young-Graphene (Beijing) Technology Company Limited announced on 25 March 2020, following press speculation.
The Company initially entered into negotiations with the Beijing Institute of Graphene Technology Co. Ltd in March 2019 and a term sheet was executed with BIGT and announced on 15 April 2019. The Company has worked subsequently in co-operation with both BIGT and the China International Graphene Industry Union towards the establishment of a joint venture in China which culminated in the joint venture agreement with YG.
Due to BIGT’s regulatory obligations, exchange controls in China and the downward movement in the Company’s share price since executing the term sheet with BIGT, it became unfeasible for BIGT to invest in Versarien at a price level that would have been acceptable to the Company. YG, with the support of both BIGT and CIGIU was established to facilitate, inter alia, an acceptable investment into the Company.
As previously announced, the joint venture with YG is conditional on it procuring that strategic equity investment in Versarien within the time frames disclosed in the announcement of 25 March 2020. Further notifications and updates regarding the joint venture and associated financing will only be made in the event that a development occurs that is sufficiently significant to require a regulatory notification.
Further details concerning the joint venture with YG, including the terms and conditions and other risk factors are set out in the Company’s 25 March 2020 “China update” announcement.
