hotting up in perth, page-26

The only situation in which the conversion of options is beneficial to existing holders compared to a cap raising is if the heads price is under about 23c. If the heads price was say 25c, then the same funds could be raised with less dilution at about 21-22c with a cap raising. The other possible situation would be if the SP hit 20-30c prior to the SB result and the SB result was subsequently bad.

Now the most likely scenario that would lead to a SP about 25c or above would be a decent find, which would likely delay or avoid the need for a cap raising, thus avoiding dilution altogether - it would be in the interest of large holders if this was delayed beyond expiry so that options are not exercised.

The company is not in imminent need of funds after the recent CR so they do not need to have options exercised at this time.

Who said the directors want to get the SP up to get options exercised? They may say that (because it is the correct thing for a director to say to shareholders), but if I held as many shares as the directors do and SB comes back a ripper then I wouldn't want my share of the proceeds diluted if I could avoid it!

The market is not a benevolent society and I wouldn't put it past large holders to try to suppress the price to keep options out of the money (and maybe force a CR at nice terms to those "sophisticated investors" to replace the shares they sold off to cap the SP).

One problem with cap raising at the moment is the flavour of the months convertible notes that venture capital suppliers seem to want, where you have no idea how much dilution you are selling out for, and if the SP drops this is further compounded by much greater dilution.