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FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

I Hate Reverse Stock Splits

InvestorEducation / Learning to Invest Apr 28, 2009 - 07:41 AM GMT

By: Dudley_Baker

InvestorEducation

I started to title this piece, ‘These Guys Are Killing Us’. Where I am coming from is that over the last eight months or so many of the junior mining companies have required additional financing to meet current requirements. In better times and at substantially higher prices, the raising of additional monies and the issuance of more shares and warrants could have been accepted, at least reluctantly, by shareholders.


Unfortunately, we all know what has happened to the shares prices of the juniors over the last eight months. So many of these companies are literally selling for pennies but many are still in need of capital, meaning they need to sell more shares and warrants usually via private placements at these depressed prices or worse. Seems also that many of the placements are being made at a 20% discount to the current share prices, thus making a bad situation even worse

A company’s share structure consequently becomes larger and larger and thus the probability grows of a roll-back in the shares. This really is a reverse stock split, meaning current shareholders receive fewer shares than they currently own. For example, if xyz gold company has 150 million shares outstanding and the current price is C$0.02, they may choose to do a roll-back say a 1 for 10. Shareholders would then have 1/10 the number of shares and the share to C$0.20.

Frankly, I hate to see roll backs because inevitably the share price continues to decline. Actually I have been known to sell shares on the news of a roll back and then repurchase them at lower prices in a few weeks or months, assuming I still like the company.

If we could only get a major rally in the juniors it would take a lot of pressure off and at least if additional funds were needed they could be raised at substantially higher prices and with fewer shares being issued.

With my large portfolio of shares and warrants there are naturally a few such companies in the situation described above. So far, I have continued to hold the shares for different reasons, i.e., management, good properties, etc., with the strong belief the companies will survive and eventually their shares will be sold at substantially higher prices. But a rally soon would be great!
And we think it is coming very soon.

For those readers not familiar with our services; Precious Metals Warrants is an online database of warrants trading on the natural resource sector in the United States and Canada. Visit us soon for more information on warrants and the markets.

Dudley Pierce Baker
Guadalajara/Ajijic, México
Email: info@preciousmetalswarrants.com
Website: PreciousMetalsWarrants

Dudley Baker is the owner/editor of Precious Metals Warrants, a market data service which provides you with the details on all mining & energy companies with warrants trading on the U. S. and Canadian Exchanges. As new warrants are listed for trading we alert you via an e-mail blast. You are provided with links to the companies' websites, links to quotes and charts, tips for placing orders and much, much more. We do not make any specific recommendations in our service. We do the work for you and provide you with the knowledge, trading tips and the confidence in placing your orders.

Disclaimer/Disclosure Statement:PreciousMetalsWarrants.com is not an investment advisor and any reference to specific securities does not constitute a recommendation thereof. The opinions expressed herein are the express personal opinions of Dudley Baker. Neither the information, nor the opinions expressed should be construed as a solicitation to buy any securities mentioned in this Service. Examples given are only intended to make investors aware of the potential rewards of investing in Warrants. Investors are recommended to obtain the advice of a qualified investment advisor before entering into any transactions involving stocks or Warrants.

Dudley Pierce Baker Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Thomas Adair
28 Apr 09, 15:41
financial developement

Developed multiple arbitrages for the financial markets. Arbitrages that produce just a few percent a year, to arbitrages that produce over 30 percent a year.

In 2001 i started developing, as of now, a dozen arbitrages. I lock in an X percentage, and Y time later, i close out the arbitrage. Over 30%/yr.

Risk-Free Investing is not only possible, but in abundance. Just that people are told and taught that it is impossible. No risk has been in front of all, but not seen.

The market is unlimited.

Thomas Adair

thomasadair@hotmail.com


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