150m shares are valued at $0.17, considering the bad debt situation. =$25m market cap (value of the company)
Add 1,500m shares, each one paying up $0.10, helping to improve the debt. Putting in $150m cash to reduce debt.
Now there's 1,650m shares. What should the company be worth? You'd expect about $25m original market cap plus $150m for the new cash = $175m.
$175m / 1,650m shares = $0.106. About the same as I said before - $0.107.
Considering that the company would then be in a much safer financial position, it may not be worth $175m including the $150m new cash, but it could be $200m+ instead = $0.12+ value.
So for holders holding at $0.17, those shares will lose value due to dilution. But if they participate at $0.10, they may make some profit on those new shares.
Is instos take up the placement, then they must see value at $0.10, meaning, they must see it as worth at least $0.12+.
RFG Price at posting:
17.0¢ Sentiment: Hold Disclosure: Held
