Ann: Q&A on the merger of QBL MCL and Medcan, page-498

Hi @BigDaniel

I agree. I can't see AK dumping his shares either. However, if we believe QBL to be a $400mil MC company, then this would equate to approx. 26c per share. However with the new dilution if we still believe QBL to be a $400mil MC company this would only equate to 13c per share. If you owned say 1 mil shares before dilution and the company had MC of 400mil you would be sitting on approx $260k holding pre-dilution and only $130k holding post-dilution for the same market cap.

Additionally, if dividends are being paid, the same amount of dividend is now divided by double number of shares (essentially halving the dividend per share payment). So post-dilution you would be receiving half the payment you would receive pre-dilution.

The BIG caveat to this is, but how much would the value of QBL increase because they now own 45% more of MCL. What is the impact to the value of the overall holding? This is the big un-answered question. Because we know for a fact our individual holdings will half by 50% BUT does this mean we now think the same QBL would be worth $800mil MC when we thought before it would be worth $400 mil? This is unknown - hence we known we will be 50% worse off in dilution but no idea how much better off we will be due to the added value.

ALSO, something people are forgetting, they talk about full control of the company. Well currently QBL own 55% of MCL so they already have full control of the company (regardless if they purchase the remaining 45% or not). There is ultimately no change in control over MCL as a result of this acquisition.

ALSO, something people are forgetting, yes currently 45% of revenue would go directly to MCL (AK) and the remainder get split between QBL shareholders. HOWEVER, QBL shareholders would get 100% of any Bauxite revenue. By acquiring the remaining 45% of MCL by issuing the new shares to AK (and co.) only and diluting the rest of us, QBL shareholders NO LONGER get 100% of the bauxite revenue, but only ~50% (with the other 50% going to AK due to his holding in the new QBL).

Again, I'm a long-term holder and believe the company are on the right path. I just believe the way in which they've endeavored down this path may not necessarily be the most efficient approach.

My point is this... you cannot simply ignore the dilution effect on the company's valuation. No matter how you cut it, it WILL have an impact on SP (due to total company value calculation), the value of our current holding AND the amount of dividends received by QBL shareholders down the track.