Any financial guys care to weigh in on this?
I think Phil's slide 19 is a good point. XOM pps is notably inflated vs. historical values based on Phil's PE assessment. Thus he says shareholders are at risk of receiving shares which can suddenly drop in value significantly. That's the problem with these lengthy processes being paid in shares which are highly uncertain and the CRP which is highly uncertain. The MIC failed to address this point I think at least from an IOC shareholder view point where we might be worried about Phil's point. So a drop of over 10% in XOM pps over this time not what I'd call a fair deal for shareholders. Apparently they communicated to the board, but maybe they left us uninformed as to whether the current trending price of XOM shares can make this a fair deal.
Note these excerpts:
Page 37 of the MIC under Information and Factors Considered by the Board:
Financial Advice. In connection with rendering the BMO Fairness Opinion, BMO provided the Board with
a detailed presentation to assist the Board in understanding the basis for the BMO Fairness Opinion, which
included analysis regarding the ExxonMobil Shares, the CRP, the implications of the cap on the CRP, the
Elk-Antelope Fields, and the potential payments due to InterOil under the Total Sale Agreement. See The
Arrangement − Background to the Arrangement,” “The Arrangement – BMO Fairness Opinion” and
Schedule E.
And page 47:
Analysis of Consideration
The portion of the Consideration comprised of ExxonMobil Shares to be paid to Shareholders pursuant to the
Arrangement is fixed at US$45.00 per Common Share and will be satisfied by issuing, in exchange for each
Common Share held, a number of ExxonMobil Shares equal to (i) US$45.00, divided by (ii) the volume weighted
average price of ExxonMobil Shares on the NYSE for the ten (10) consecutive trading days ending on (and
including) the second trading date immediately prior to the effective date of the Arrangement.
In evaluating the portion of the Consideration comprised of ExxonMobil Shares, BMO is of the view that the trading
price of ExxonMobil Shares represents a reasonable proxy for the value of ExxonMobil Shares.
I guess since the price is trending steeply downward, the "proxy" for the value of XOM shares says this is a shrinking opportunity.
Note that the short interest (a sort of proxy as to how much the shares are over valued) is at a 12 month low and has been steadily declining. Probably because the stock pps has been falling steadily since peaking over $92 in December. Now it's at 81.84 today, up slightly. It may be that Phil's delay made us some money (if/when XOM goes back up), assuming the sale goes through, or maybe avoided losing money on XOM shares, is a better way to look at it.
The MIC presents the XOM shares as the rock of stable value. It really hasn't done a proper job in explaining what the value of XOM is. The market seems to think this is an overpriced investment. So we get more shares that are falling in value. Using the volume weighted approach, we will all receive $45 volume weighted value which can only be sold for less than that amount in a falling price regime.
| % of Float Short | % of SO Short | Days To Cover | Avg Daily Vol | Short Interest | |
|---|---|---|---|---|---|
| Jan. 13, 2017 | 0.845 | 0.8445 | 3.228 | 10.85M | 35.02M |
| Dec. 30, 2016 | 0.9115 | 0.911 | 3.418 | 11.05M | 37.78M |
| Dec. 15, 2016 | 1.054 | 1.053 | 3.965 | 11.01M | 43.66M |
| Nov. 30, 2016 | 1.016 | 1.016 | 3.711 | 11.35M | 42.12M |
| Nov. 15, 2016 | 1.086 | 1.086 | 3.998 | 11.26M | 45.02M |
| Oct. 31, 2016 | 1.302 | 1.301 | 5.708 | 9.453M | 53.96M |
| Oct. 14, 2016 | 1.230 | 1.230 | 4.248 | 12.01M | 50.99M |
| Sept. 30, 2016 | 1.406 | 1.406 | 4.614 | 12.63M | 58.28M |
| Sept. 15, 2016 | 1.307 | 1.306 | 6.109 | 8.868M | 54.17M |
| Aug. 31, 2016 | 1.232 | 1.232 | 4.99 | 10.23M | 51.07M |
| Aug. 15, 2016 | 1.186 | 1.185 | 4.186 | 11.74M | 49.13M |
| July 29, 2016 | 1.096 | 1.095 | 4.187 | 10.85M | 45.40M |
| July 15, 2016 | 1.266 | 1.265 | 4.508 | 11.64M | 52.46M |
| June 30, 2016 | 1.147 | 1.146 | 4.118 | 11.54M | 47.54M |
| June 15, 2016 | 1.159 | 1.157 | 4.677 | 10.27M | 48.01M |
| May 31, 2016 | 1.102 | 1.100 | 4.376 | 10.44M | 45.67M |
| May 13, 2016 | 1.022 | 1.021 | 3.934 | 10.77M | 42.36M |
| April 29, 2016 | 0.9804 | 0.979 | 3.802 | 10.69M | 40.63M |
| April 15, 2016 | 1.004 | 1.003 | 3.853 | 10.80M | 41.62M |
| March 31, 2016 | 1.063 | 1.062 | 3.250 | 13.55M | 44.04M |
| March 15, 2016 | 1.118 | 1.117 | 3.139 | 14.77M | 46.35M |
| Feb. 29, 2016 | 1.262 | 1.260 | 2.852 | 18.33M | 52.29M |
| Feb. 12, 2016 | 1.331 | 1.342 | 2.473 | 22.52M | 55.71M |
| Jan. 29, 2016 | 1.245 | 1.254 | 2.563 | 20.33M | 52.11M |
| Jan. 15, 2016 | 1.247 | 1.256 | 2.884 | 18.10M | 52.19M |