exciting few weeks ahead, page-4

Unfortunately, there is still a huge number of Sells waiting at .07 and .08 (and probably a lot more off-screen), this is the hangover from the capital raising, those sub-underwriters who are happy to take 40+ percent gains and exit.

This means the current short-term price risk for BGS is to the downside.

If BGS report good drilling results in the first campaign, it will give the sub-underwriters from the capital raising a chance to cash-out their shares, but the sheer number of shares that they want to get rid of means that any good drilling assays will only result in minimal share price appreciation (at best), because the capital raising allotments will soak up any gains and hold the price down.

If the drilling results are not so good though, then in the current market there is likely to be a dump, with the capital raising sub-underwriters just content in the short term to get their money back, hence the risk in the short term for BGS is to the down side.

This once again highlights the problem of releasing huge numbers of shares cheaply (though sometimes it is the only way a company can get the capital to drill).

Until the capital raising shares are able to be washed through the system, BGS management and staff are effectively working for Cygnet's sub-underwriters.

I believe that Cygnet themselves have not sold any stock, nor do they intend to in the short to medium term. This is good, and is a sign of support, so it is just the damn sub-underwriters of the capital raising that need to be washed out of the system, and how long this will take is an unknown.

It would seem therefore, that the real chance for BGS to make some proper gains on-market will come at the second and third drilling campaigns. Which means that BGS really needs to have 2 successful drilling campaigns, one to washout the sub-underwriters, and one to appreciate the share price. This puts extra stress on the company as a whole.

If I was BGS and devising a strategy, and the first drilling results were good, I would hold back a little on the tenor and tone of the first drilling results release notes. I would release just enough good news, so that the sub-underwriters are able to sell their shares, and then I would ramp up the rhetoric and tone if the second and third drilling campaigns are successful.

Then I would go looking for a cornerstone investor with deep pockets.

This would be the best way for things to play out in the longer term for the more committed BGS shareholders.

Gw

I am surrounded by flatterers and fools. It can drive a man to madness.
Half of them don’t dare tell me the truth, and the other half can’t find it.
(George R.R. Martin - A Game of Thrones)