resolution 7. pros and cons

At the upcoming EGM on Wednesday 19th Septemeber shareholders are asked to vote on a resolution that is likely to have a major impact on the future of the company.
In current SP terms it is asking shareholders to allow a capital raise to clients associated with Novus Capital of approximately 30% of the current market value of GGP. With this will go 30% ownership of the company.

The company states it needs the funds to restart drilling in the PB and buy new acreage. Whether it will be successful in the capital raise remains to be seen as it has already being forced to amend the terms in favour on potential investors in this capital raise.

I am been tossing around the pros and cons of this resolution.

The pros appear to be a kickstart of a horizontal well that the company will not gain much income from but will be able to use an example to a potentional JV. It will also be able to aquire new acreage that it will not have any funds to develop. This at a time when acreage in the PB appears to be at a premium.

The cons with the addendum is that these new note holders can convert at any time and get a 10% discount to the share price, there will be a massive dilution of the current shareholders and the company can then issue another 15% of the expanded company without shareholder approval. In short the shareprice is unlikely to be able to improve due to continual dilution and then new dilution when the company needs funds to drill a 2nd horizontal, develop the new acreage or pay for the 3rd eagle ford well or even pay its staff.

In many regards the company has treated its shareholders outside to top 20 with disregard. It has not been forthcoming with information and when announcements are made they are either corrected or contain mixed messages.

I see Resolution 7 as a transfer of power away from smaller shareholders further into the hands of clients of Novus. To date this power has been already abused in my mind and the future with a yes vote looks even worse.

So what would happen if NO won the day.
The company would raise the 15% that it could without shareholder approval or approximately $4 million from the capital note holders. It could drill the horizontal for $1.5 mill while it looks at its options to pay for the fracc. Debt finance a JV etc. Or it could use the $4 mill to drill 3 verticles with just $500k from its current production.

In short the company would get a message that each share has an equal value and each shareholder should be kept fully imformed.

My best mate is 2nd in charge of the worlds 2nd biggest energy project and he earns just a little bit more than the MD of this company. He has time to communicate with me more than once ever 4-8 weeks which is the current standard of GGP.

For mine it is time that management understood who is really supporting the company and not just showing lip service to the supporters of the latest raise that are effectively paying their wage.

The addendment to RESOLUTION 7 changed my mind on my vote.
Smaller shareholders need to remember that any shareholder who has participated in the new capital raise will not be able to vote on Resolution 7. Given the size of the raise I expect nearly all of the top 20 shareholders will be in a position where they will not be able to vote. Therefore this may be the last chance for smaller shareholders to have their voice heard.

It is important to vote either yes or no. BE PROACTIVE. GET TO THE MEETING OR SEND YOUR FORM IN BY FAX OR MAIL.
(At least 2 days early, by 16th)

I am voting NO. I want more communication, more options than just coming back to the market and diluting shares, and more focus on the PB, the main game.

It wouldn`t surprise me if this vote is held prior to the finalisation of the capital raise so the bigger shareholders can vote first and then take up the offer. Just one more reason to vote NO as the Top 20 only have 15% of the company!!