18-Jan-10 10,000,000 Shares Cygnet clients placement 25-Jan-10 4,000,000 Options Cygnet Fee for Rights Issue 25-Jan-10 917,193 Shares Cygnet Fee for Rights Issue 25-Jan-10 1,244,743 Shares Cygnet Fee for Options 09-Feb-10 600,000 Shares Cygnet Fee for Globe Drill placement 09-Mar-10 2,444,934 Shares Cygnet underwriting obligation 09-Mar-10 8,691,390 Shares Cygnet underwriting obligation 09-Mar-10 200,000 Shares Cynget introduction fee 26-Aug-10 23,571,429 Notes 66 notes not yet converted 26-Aug-10 3,571,429 Shares 10 notes converted to shares 29-Nov-10 13,471,867 Shares Cygnet underwriting obligation 29-Nov-10 13,471,867 Options Cygnet allocation as 1 per Share 29-Nov-10 5,000,000 Options Cygnet Fee for Rights Issue 13-Apr-11 22,705,748 Shares Tranche 1 Allocation 13-Apr-11 27,088,335 Shares Tranche 2 Shares (assuming 75% Cygnet) 13-Apr-11 9,336,391 Options 1 for 4 from Tranche 1 and 2 13-Apr-11 4,000,000 Options Cygnet Fee for capital raising
So after the cap raising, it seems to me Cygnet and its clients will effectively control more than 50% of the company. A few assumptions there, including how influential Cygnet is over its clients and whether clients have bought or sold shares and options since, but I wouldn't be surpised if the structure of this latest Capital Raising was designed to deliver that outcome.
Great sign cashflow is no longer a pressing issue. I think we're still in the unknown on status of the rig. Obviously a secured contract removes that doubt.
The size of the cap raising is a positive. If Cygnet were just providing capital to protect their existing investment in the hope of a contract, they could have done that with less than $10M. It seems to be a more confident play than that, or a calculated risk. I imagine they'd also have an exit planned, possibly to a suitable buyer better positioned with clients and funding to truly exploit the technology by cranking out more rigs sooner rather than later, which might make sense of the move to premises where they can more readily crank out many rigs per year.
The dilution is not a big issue I think. Existing shareholders will have a shareholding in $10M of cash that didn't belong to them yesterday, so its a % dilution of the pie, but the pie got bigger. Anyway, Facebook wouldn't be earning $2B of revenue if the guy running it didn't dilute and secure extra funding along the way.
The final curious thing I'd previously overlooked, was that Cygnet was paid a finders fee for introducing Globe Drill to Coretrack. Given Cygnet and clients will have ploughed around $18M into Coretrack since Coretrack bought the Globe Drill I find it hard to believe getting control was plan all along. It they thought Globe Drill was such a good buy last year, they could have bought Globe Drill themselves then instead of offering it to Coretrack. So I think they've either they've been forced into their current position or seen an opportunity.
CKK Price at posting:
18.5¢ Sentiment: Hold Disclosure: Held
