I just thought of doing a pre-capital raising analysis and shall also try to address some concerns which I read today.
1) All speculation
First of all, all we are doing right now is speculation. Instead of worrying, I would rather calmly read the announcement on Monday or whenever rather than listen to fear-mongering and coming to pre conceived notions.
2) Not all capital raising is bad for share price –
Let us go back to the Capital raising last (2014) June-July at 50 and rise to 90
I can’t remember the exact details, but if I remember right, the price was something like 60, with capital raising at around 50.After the capital raise, the price quickly went on to shoot even higher and reach 90. Many people fear capital raisings, but it might not play out exactly according to the fears, and proper funding might even bring more assurance and solid investors on board. It all depends on whether instos are on board as cornerstone investors, how good the announcement/(s) is/are.
If I am not mistaken, here are the relevant articles of last year's movement, but please research further and confirm for yourselves
3) Management Skin in the game
I’ve mentioned many times that management themselves have good skin in the game and won’t sell TON short from point of view of very low share priced capital raise. Remember that they have more shares than all of us and have most to lose /gain
4) New cornerstone investor I read on HC over the last couple of days that BB and team have been busy with making presentations to instos recently. If some of this has translated into new cornerstone investors, then that is to be welcomed, IMHO
5) Many Trading halts
TON is a growth company. We are going to have many trading halts along the way as we keep on growing. Some non holders are going to joke about it to discourage us but it is up to us to ignore that. The fact is that the last 2 trading halts were major announcements (2 offtakes, funding etc) which changed the dynamics of the graphite industry. Maybe, management felt that something might have leaked and hence quickly announced a trading halt. I see no issue with any number of trading halts
6) Funds for operation –
As mentioned by me many times, I give funding massive priority especially since I’m bearish on global economy in coming years. Today’s overall ASX market fall is nothing compared to what I fear could come in coming years. As such, I’m all for a well funded company and especially one where there is minimal burden of debt. As such, I welcome any equity funding which will help us along the way. Remember that we have much to grow and long term growth is the ultimate prize.
7) Dilution fears - growth company
Dilution will come along the way and cannot be stopped for a growing company. There is nothing that can be done about it. There is nothing to fear if we are seeking funds for growth and not for some emergency payment of debt
8) Amount from SQZG
I’m okay with both the equity and debt funding from SQZG. Equity because there is no debt to be paid and we get a cornerstone investor. Debt because the payment is directly linked to sale of graphite to them (I assume the contracts would be properly worded in this respect to ensure the debt payment to SQZG is directly linked to the graphite sale to SQZG)
9) Recent price action
Massive sudden volume yesterday suggest news is more likely to be good rather than bad. Today too, the price held quite well except for the absolute end where it is probable that some day traders had to sell off. Some high volume today was again seen at the start where the price was around 43-44
10) Leaks
Leaks unfortunately seem to happen with all companies. I guess it is inevitable because they have to deal with so many instos for discussions, etc, and someone over at the instos, potential offtakers, etc. could also be leaking. If that is what happened yesterday/today, then management did a good job in quickly calling for a trading halt today
11) Capital raise with instos good for shareholders if good for instos
I think it was @insaf who mentioned that if capital raise is good for instos then it is good for shareholders. I think that is a very good point. I too would rather have a growth related capital raise with an insto rather than a desperate capital raise to pay off some urgent debt, and if the instos feel it is right, then it would be beneficial for shareholders too
12) Price capping
Price might be capped for some time but price will eventually reflect fair value. We’ll just have to deal with this. I’ve probably got a little more patience since my favourite commodity/investment is gold. If TON is being capped, then you won’t believe the extent to which gold is being capped. As an investor, we just have to be patient till Mr. Market wakes up
13) Prevention of sale / Escrow
I’m hoping that any fresh equity issued has some clause whereby the new equity cannot be sold for a year or something like that or some sort of escrow. Of course this is speculation but I think that if some insto is willing to join as long term shareholder, then they won’t have any issue with that, and would be mutually beneficial
14) Long term prize
IMHO, the share price should be multiples higher if we just make it to production. Anything that sets us on the path towards this long term prize is welcome, and we should not lose sight of that
15) Small insignificant amount –
I could be wrong but I have a hunch that this capital raise would not be a major amount or if it is a good amount, then the issue price would be good. The reason is that management are aggressively pursuing funding and it is highly unlikely that they would do something weird now after the sterling and flawless performance over the past 2 months
16) Conclusion –
I'm taking it easy right now. Who knows we might just end up with a cap raising at 45 c or a 1 million capital raise at 40 c Either way, we have massive good news that will keep flowing in the time to come. So, I'm not paying too much attention to this right now.
As always, my comments are mainly from longer term angle.
TON Price at posting:
39.5¢ Sentiment: Buy Disclosure: Held
Either way, we have massive good news that will keep flowing in the time to come. So, I'm not paying too much attention to this right now.
