I think one of the most relevant points to look at in the future is whether the stock options will be exercised or not... I understand that they would involve ~60% more shares, which makes me think that all the great potential for future growth will be capitalized more by the owner and not so much by the minority shareholders (big risk!)...
On the other hand, FEMSA (owner of Bara) has proven capabilities to open more than 1,000 stores per year (as in the case of Oxxo) and US$10 billion in cash! They will be a great competitor if they decide to do so!
Thanks for your great comment Diego! You made two very important points that I didn’t mention. The first one supports my theory that the valuation isn’t very attractive at this price, and the second is something I completely missed. Definitely worth monitoring.
Hi Diego, from where do you get the 60% dilution? When I did my numbers, I think I got a 25-30% dilution, mostly by the stock options they gave 15-20 years ago.
Well, reading the sales prospectus that was filed in February (Form 424B1), there are several details about the stock options (although I still have some questions). The company at that time had (rough figures):
= 114 million shares outstanding (112+2)
+ 20.1 million fully vested "common stock options" from the 2004 Plan (weighted average strike price US$2.73)
+ 13.4 million unvested "common stock options" from the 2004 Plan (which will eventually be granted at a strike price of US$6)
+ 7.5 million fully vested "exit stock options" from the 2004 Plan (weighted average strike price US$3.43)
+ There is an "Equity Incentive Plan" where 1.3 million stock options have been granted at US$29
+ There are 0.6 million RSUs
+ 4.1 million "Common stock options from the 2004 Plan remain to be granted
+ 6.5 million stock options from the "Equity Incentive Plan" remain to be granted
+ It's not clear to me, but they mention a "Liquidity Event Share Plan" for 7.5 million additional shares granted to "senior management" (we all know who it goes to) with delayed delivery (which should be 2025)
+ I'm also unclear, but they mention a "Bolton Partners Share Allocation" for 4.2 million additional shares with delayed delivery (which should be 2025)
Given that, I'm pretty sure that of the current 114 million shares outstanding, we'll eventually reach 157 million, and as the other stock option plans are fully vested, the number will rise to 168 million. What I'm not sure about is whether the last two points are ADDITIONAL or if they're part of what's already outstanding.
Great analysis! Thank you so much for sharing!
I think one of the most relevant points to look at in the future is whether the stock options will be exercised or not... I understand that they would involve ~60% more shares, which makes me think that all the great potential for future growth will be capitalized more by the owner and not so much by the minority shareholders (big risk!)...
On the other hand, FEMSA (owner of Bara) has proven capabilities to open more than 1,000 stores per year (as in the case of Oxxo) and US$10 billion in cash! They will be a great competitor if they decide to do so!
Thank you again for sharing!
Thanks for your great comment Diego! You made two very important points that I didn’t mention. The first one supports my theory that the valuation isn’t very attractive at this price, and the second is something I completely missed. Definitely worth monitoring.
Hi Diego, from where do you get the 60% dilution? When I did my numbers, I think I got a 25-30% dilution, mostly by the stock options they gave 15-20 years ago.
Hola Javier!
Well, reading the sales prospectus that was filed in February (Form 424B1), there are several details about the stock options (although I still have some questions). The company at that time had (rough figures):
= 114 million shares outstanding (112+2)
+ 20.1 million fully vested "common stock options" from the 2004 Plan (weighted average strike price US$2.73)
+ 13.4 million unvested "common stock options" from the 2004 Plan (which will eventually be granted at a strike price of US$6)
+ 7.5 million fully vested "exit stock options" from the 2004 Plan (weighted average strike price US$3.43)
+ There is an "Equity Incentive Plan" where 1.3 million stock options have been granted at US$29
+ There are 0.6 million RSUs
+ 4.1 million "Common stock options from the 2004 Plan remain to be granted
+ 6.5 million stock options from the "Equity Incentive Plan" remain to be granted
+ It's not clear to me, but they mention a "Liquidity Event Share Plan" for 7.5 million additional shares granted to "senior management" (we all know who it goes to) with delayed delivery (which should be 2025)
+ I'm also unclear, but they mention a "Bolton Partners Share Allocation" for 4.2 million additional shares with delayed delivery (which should be 2025)
Given that, I'm pretty sure that of the current 114 million shares outstanding, we'll eventually reach 157 million, and as the other stock option plans are fully vested, the number will rise to 168 million. What I'm not sure about is whether the last two points are ADDITIONAL or if they're part of what's already outstanding.
Happy to chat further!
impressionante deep-dive
Thanks Noah, I really appreciate it!
when looking at tbbb, did you saw PesoRama, Inc. ( PESO.TSX ) ?