something there abouts, "that was what their advice the market would support"
Now, whose advice ? the broker filling his mates pockets ? How do they work that out ?
Is their an auction on a book build ? or was it arranged ?
It was just weak. So was the body language. There was no elaboration. Caught with no justification for dilution of 1=> 2 +1
= 3-1. They had to expect that question.
Why is someone going to pay 0.6c, when the heads are 2c ?
(which is an attractive bet from 0.2c v 1c = 3x V 2X) But for it to be so, the guy paying 0.6c has to also make a upside bet on the ops over the heads.
That guy has to consider...
If the heads double to 4c (120m FD), the ops only go to 1c. thats 2.0X v 1.67X (fail) (from the 2c/ 0.6c entry)
if the heads going to 5c (150m FD), for a 2.5X v 3.33X ops (win) (from the 2c/ 0.6c entry)
The equal par is 4.3c. Bet above that for heads, and the ops are in front at the 2c v 0.6c entry bet
129m mc FD
If you are betting on the current heads at 1c V 0.2c, to get to same target, then its 4.3X v 6.5X
Which is a win on the ops side. But i would still take 4.3X heads over 6.5X with unknown deliverables. Because a fail on cash burn/ delays, can flip that around with further dilution.
But i can probably make the case that the buoyancy trade could lift this to 1.5 to 2c. But from there, it needs to perform with newsflow.
The risk remains though, that delays burn the cash through to another raising.
Hence a 0.1c option trade, if it rains then there is a case to sell into the 0.2 bidders.
But i would take 1c heads, over 0.2c options. Thats just me. If there was less supply, and the registry was tighter, and we could project a higher SP, then i would pay the 5-1 at 0.2c. But not when there is 1b overhang that could open the 0.1c window..
Not investment advice. And please check the maths, and only a stab in the dark guess if they monetize.
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