Thoughts on the new events with MUDS
It is clear that the merger is going to get done since it looks like a majority of the HYCT common is going to vote in favor of the purchase by MUDS.
I looked more at everything and here are my thoughts on it:
1: It looks like none of HYCT common traded after 12/27/2019; so it looks like people must have been selling to book the loss in 2019. I still have block on the bid, in case anything else shows up to be bought, but I am not expecting there to be anything else with the announcement of the purchase.
2: HYCT and HYCTW are 'still not trading right'. With the strike price of HYCTW around $8.40, HYCT should trade, if it trades at all, higher than $8.40 OR HYCTW should only trade for pennies, maybe even less depending on the Blakc-Sholes valuation of the warrants.
3: With the total value of the purchase being around $540 million, and MUDS owning 41% of the new entity, that would mean the existing Hycroft would be valued at 59% of that or around $318 million. The estimates of the value that Hycroft needs to be higher in order for the warrants to start to have value.
4: While I can't figure out how the HYCTW will be handled, I expect they must somehow be taken care of since they are part of the Hycroft. I do wish the company would issue a statement on this.
5: I am concerned in the whole 'financial engineering' aspect of the transaction. The mine is in operation and they do report producing gold, but no indication as to how much or what the financials are yet. The thing I do not like about the whole purchase are these multiple levels of borrowing, common and warrants with MUDS instead of just a straight purchase for cash and stock from MUDS.
6: While anyone who holds HYCT or HYCTW will probably want to hold onto them and see what the combination with MUDS brings, I think another way to play this is to buy the MUDS units, MUDSU symbol. The common is MUDS and trades for around $10.30. The units trade for around $10.90 and are one share of common plus one warrant that is good for five years with a strike price of $11.50. They also have a provision in that if the stock is $18 or higher for 20 days that they must be exercised or expire.
Louis J. Desy Jr.
