RentGuarantor: Leveraging Convertible Debt and Share Sub-Division to Capitalize on Regulatory Tailwinds

The UK private rented sector (PRS) is on the cusp of a seismic shift, and RentGuarantor Holdings PLC (AQSE: RGG) is positioned to profit from it. With its recent convertible loan note conversion, share sub-division, and a regulatory landscape primed for disruption, the company is primed for growth acceleration and liquidity gains. Let's dissect how these moves—combined with the upcoming Renters' Rights Bill—make RGG a compelling buy ahead of its AIM migration.

1. Convertible Loan Note Conversion: A Signal of Investor Confidence

RentGuarantor's £500,000 convertible loan note (CLN) issuance in November 2024 (now likely partially converted) is a masterstroke. The terms allow the principal to be converted into shares at the lower of two prices: the share price on the conversion date or the average price over the prior 60 days. This dual mechanism protects investors while aligning their interests with the company's growth.

Crucially, the 10% annual coupon on these notes underscores RGG's financial health and ability to attract capital. Even if unconverted, the notes are redeemable after two years—a clear win-win for investors. The premium to recent trading prices (as of June 2025, shares traded at 252.50p, down from a 52-week high of 290p) suggests existing shareholders and new investors alike are betting on upward momentum.

2. Share Sub-Division: Lowering the Entry Barrier for Institutional Investors

On June 9, 2025, RGG executed a 10-for-1 share split, reducing the price per share from £1 to 10p. This move slashes the entry cost for retail and institutional investors, boosting liquidity. Post-split, 118.8 million shares are in issue, compared to ~11.9 million pre-split.

Why does this matter?
- Enhanced Liquidity: A lower share price attracts more buyers, reducing the bid-ask spread (currently 15p, or 6% of the price).
- AIM Readiness: The split aligns with AIM's requirements for broader market participation, setting the stage for a smooth migration from the AQSE Growth Market.
- Valuation Consistency: Institutional investors often avoid micro-cap stocks with high per-share prices. The split removes this barrier, potentially attracting funds tracking AIM indices.

3. Regulatory Tailwinds: The Renters' Rights Bill as a Growth Catalyst

The Renters' Rights Bill, set to take effect in late 2025, is a goldmine for RGG. Key provisions include:
- End of Section 21 Evictions: Landlords must now evict tenants only for valid reasons (e.g., rent arrears). This increases demand for professional guarantees, as landlords seek risk mitigation.
- Periodic Tenancies: Tenants can exit with two months' notice, making rent guarantees critical to ensure financial stability for landlords.
- Bereaved Guarantors Protected: Guarantors no longer liable post-tenant death, reducing risk and encouraging broader adoption.

These changes will force landlords and tenants to rely more on platforms like RGG's digital guarantee service. With 25,000+ new users/month in 2024 and 1,100 partnered letting agents, RGG is already scaling. The Bill's implementation could supercharge this growth, as compliance costs push smaller players out of the market.

4. The 2025 Growth Pipeline: Where the Money Goes

Proceeds from the CLNs and share sub-division are earmarked for:
- Workforce Expansion: Hiring more staff to process the surge in tenant applications driven by the Bill.
- Tech Upgrades: Enhancing its platform's AI-driven risk assessment tools to handle complex tenancy terms.
- Partnerships: Strengthening ties with industry bodies like the National Residential Landlords Association (NRLA) to stay ahead of regulatory demands.

Investment Thesis: Why Buy Now?

• Catalyst-Laden Timeline: AIM migration (likely 2025), Bill implementation (Oct 2025+), and CLN conversions create near-term upside.
• Valuation Multiplier: Post-AIM, RGG could attract multi-bagger valuations akin to peers like Propertymark or Clever Student Lets.
• Risk Mitigation: The Bill's protections reduce guarantor liability, lowering RGG's default exposure.

Buy Recommendation:
- Entry Point: Target shares near the post-split low of 250p, with a stop-loss below 240p.
- Hold Until: At least the AIM listing announcement (expected Q4 2025) and the Bill's effectiveness in late 2025.

Conclusion: RGG is a Play on PRS's New Normal

RentGuarantor has engineered a strategy that turns regulatory upheaval into opportunity. The convertible notes and share split are tactical moves to secure liquidity and scale operations ahead of a market reset. With the Renters' Rights Bill reshaping the PRS, RGG's platform is uniquely positioned to dominate a sector in flux. For investors willing to act before the AIM migration and regulatory changes crystallize, this is a rare growth story with a clear path to value creation.

Act now—before the market catches up.