Today IIG (IIG.L) announced a restructuring of its shares and warrants.

Perhaps predictably, the market read the headlines and threw the baby out with the bathwater. At the time of writing, the shares are down 9% or so at £2.65

This is a great entry point if you wish to buy in.

Let’s unpack what the RNS really means.

• The Share Issue: IIG issued 522k shares to pay M&A advisors ahead of the Acceler8 (AC8) takeover. With over 99% of their £498 million value locked up in illiquid investments and only £1.3 million in cash as of March, settling these bills with a tiny 0.22% equity dilution was a necessary move to protect their remaining liquidity.

• The Warrant Amendment: Management reduced the strike price on existing warrants from £1.56 down to 10p. The market likely reacted to the fact that IIG is walking away from a potential £6.2 million cash injection. BUT what do shareholders get in exchange for that lower strike price? The warrant holder's future share allotment has now been cut in half.

The net result? When factoring in the new advisor shares and the reduced warrants, the fully diluted share count actually decreases by 1.46 million shares.

This arrangement was done late last year, at a time prior to the raise earlier in the year and when cash was tight. What’s the market thinking? That the arrangement happened today?

The Bottom Line

This is a standard cap-table clean-up ahead of the £600 million all-share merger with AC8. Management is preserving much-needed cash, finalising the share count so AC8 can accurately price the deal, and the net result from the RNS is that long-term dilution has been reduced.

The share price should be going up, not down!

Stay magical Wizards,

#IIG.L #AC8.L