Analyst Note| Michael Hodel, CFA |
We are adjusting our Millicom fair value estimate to reflect the terms of the equity rights offering that the firm is in the process of completing. The stock is now trading without the right to participate in the offering, meaning that the stock price now reflects dilution from the offering. As a result, our fair value estimate mechanically falls to $34 per share from $51. To entice participation, shareholder received the right to purchase 0.7 shares for each share owned at a price of $10.61 per share, versus a prior share price of around $22. To preserve the economic value of their investment, shareholders must either exercise their rights and purchase additional shares at this heavily discounted price or sell their rights to another investor. The subscription rights are exercisable and will begin trading on May 27. The rights will continue trading until June 8 and can be exercised until June 13. Millicom announced its plans to issue the additional shares last fall to fund a portion of the buyout of its Guatemalan minority partner.