A $2.1 billion rights issue for AngloGold Ashanti belly flopped as shareholders rejected a restructuring and foiled its plans, at least for the time being, of a spin-off that would trade on the London Exchange. The company was advised that before it would be allowed to do the demerger, it would have to take care of its debt, but shareholders rejected a rights issue, because it would dilute the value of the shares.
UBS and Goldman Sachs advised this strategy which blew up in the faces of AngloGold Ashanti management. John Paulson, who owns a sizeable stake in the company, saw trouble on the horizon and disapproved of the plan. While he agreed with restructuring, he preferred to see it done in a way that would not dilute the value of the shares, “The way they are doing this with this massive dilutive equity offering, it’s value destructive.”
The stock shed 15% in one day, and management thought they had the approval of shareholders. However, it seemed that shareholders were objecting to the scale of the offering, not that one occurred. AngloGold Ashanti has rejected the plan of selling off mines to raise cash.