Heavy take up of Lonmin rights. Looks like it could be “the squeeze is on… and it’s on the street” part 2!

UPDATE – Lonmin confirms that Citigroup Global Markets Limited, Hsbc Bank plc, J.P. Morgan Securities plc and Standard Bank Plc have procured acquirers for the 11,080,521 New Shares for which valid acceptances were not received at a price of 272 pence per share, equivalent to ZAR 38.0025 per share at the time of sale.

Accordingly, none of Citigroup Global Markets Limited, HSBC Bank plc, J.P. Morgan Securities plc, Standard Bank Plc or the other Underwriters, as underwriters pursuant to the Underwriting Agreement, will be required to subscribe for any New Shares under the terms of the Underwriting Agreement.

Todays rights take up announcement of nearly 97% is great news for shareholders and particularly those who took up the rights as it means there is a very small amount of so called “rump” stock to be placed with other institutions and also avoids the underwriters from swamping the market with stock. In fact, given the small value of just over £15m of the rump then I would expect the underwriters to hold onto the stock, particularly given the material undervaluation of Lonmin relative to its peers.

Extracts from the rights announcement –

Lonmin today announces that, as at 11.00 a.m. (UK time) on 10 December 2012, being the latest time and date for receipt of valid acceptances, it had received valid acceptances in respect of 354,416,422 New Shares, representing approximately 96.97 per cent of the total number of New Shares offered to Shareholders.

With almost 20% of the company’s float still out on loan it is only a matter of time before a material squeeze in the stock plays out in our opinion. The expectation by the likes of Sothic Capital Management that are part of the short sellers, that the Group would struggle with the capital raising has not played out and it looks like it’s time for another move on the chess board… We expect 300p+ in the New Year.