St Barbara (ASX: SBM) shares are down 45% today. SBM shares have fallen on good news, not bad. Yes, that sounds a little odd and yet it is true. This is not the result of some disaster, rather it's a planned move which creates value of St Barbara shareholders and even does so in a tax efficient manner. Which again sounds odd but there we are.
What's actually happened here is that St Barbara has sold off one particular mining asset, the “Leonora Assets”. “St Barbara Limited (“St Barbara” or the “Company”) (ASX:SBM) is pleased to announce that the sale of its Leonora Assets (“Asset Sale”) to Genesis Minerals Limited (“Genesis”) (ASX:GMD) has completed today.” OK. Some of that sale was paid in cash and that has enabled St Barbara to pay down debt and so on. They're now a clean, lean machine. “St Barbara Limited (“St Barbara” or the “Company”) (ASX:SBM) today announces a closing cash balance of $294 million at 30 June 2023 following completion of the sale of the Leonora Assets and a strong Q4 June FY23 performance from all three operations, with final reconciled gold production expected to fall in the mid to upper end of guidance range”. Well, great, except why does this lead to a 45% decline in the share price?
St Barbara share price from ASX
The answer being that only part of the payment for the Leonora assets was made in cash. The other part was paid in Genesis shares. At which point St Barbara could hold those Genesis shares. Or, of course, sell them. Selling them would create a tax bill, so, perhaps no point in that. Holding them, well, why would a company want to force all shareholders into having an indirect holding in another company? Perhaps some system could be worked out by which those who want to hold Genesis shares can, those who don't may be able not to?
That is indeed possible - St Barbara distributes the Genesis shares to the St Barbara shareholders: “ St Barbara Limited (“St Barbara” or the “Company”) (ASX:SBM) refers to the announcements of 18 May 2023 and 30 June 2023 which set out the key dates for the distribution of Genesis Minerals Limited (“Genesis”) (ASX:GMD) shares to St Barbara
Shareholders. Tomorrow (5 July) is the final trading day to acquire St Barbara shares on market so as to be recorded on the St Barbara share register by the Record Date for the distribution of Genesis shares.”
If you owned St Barbara shares yesterday then you owned SBM plus that coming distribution of Genesis shares. If you own St Barbara today then you own only SBM and not the distribution of GMD shares. The value of the GMD shares is about 45% of that of St Barbara, therefore the mechanical drop of 45% in SBM today.
And that's it. SBM shares are down because the distribution has now happened - or as we can put it, St Barbara is down 45% as it's just made SBM shareholders richer by hte value of the GMD shares.