Despite all the filings and the likely resulting panic, nothing has changed - that is, there will be no additional dilution and no equity raise.
MPEL’s shelf registration last night was required by the Hong Kong Stock Exchange to set up a backstop liquidity provision as part of the dual listing. Nothing has changed. This is a necessary step for the Listing By way of Introduction (LBI). To be clear, there will be NO dilution from the listing and NO new equity. That filing doesn’t change that.
If the backstop is utilized, the process involves borrowing shares that ultimately are returned so no new shares are issued. The shelf registration was not related to the shareholder loan conversion. That was taken care of in an additional filing: 40 million ordinary shares were converted at US$8.61 per ADS, representing a dilution impact of 0.80%. This was in line with previous announcements. To our knowledge, the HKSE recommended that the shareholder loans be converted into equity to increase the perceived independence.
We've already received numerous client inquiries related to the filing, most of them expressing concern that MPEL is raising additional equity. That is not the case. Nevertheless, since management must comply with essentially a gag order related to the listing, we don't believe the ramifications (essentially none) of these filings are well understood by the investment community. The stock may be down on this, but it shouldn't be which may present a buying opportunity.
