A lot of anxiety about dilution, but I think people need a better understanding of dilution and partnerships.
As mentioned before, all pathways to raising money for a company require a cost.
The cost is either a watering down of your equity stake, in investing terms technically dilution.
Or the cost is the watering down of your return from business such as EPS.
A loan has costs, a CR has costs a partnership has costs.
They all do, no way around it.
So if you take it to general terms all dilute your investment in some way.
Yes, some pathways are more appealing to minimize the effect of dilution, and that is what the Boards role is, to choose the most beneficial pathway when weighing ALL things up, they don't really concern themselves if some shareholders have anxiety about a particular pathway, the choose a pathway that is deemed best for the company, and therefore best for ALL shareholders.
So our CEO has mentioned the aim for non-dilutionary pathways when communicating with us, and in technical investing terms that suggests retaining your equity stake.
Remember though that all ways that raise capital have a cost, a partnership may, or may not, provide a greater dilution in the revenue the company makes than what the effect a CR would.
There are also variations on Credit Raisings.
The version we have is one of the least dilutionary, pro-rata entitlement offer.
So everything will have been thought through by very astute people, our Board, they have determined that at this time the offer they have put forward is best for the company financially, and therefore for us.
Dilution comes to our money via any form of raising cash, partner CR, or loan.
We have taken what is pretty much a textbook pathway for keeping technical equity dilution to a minimum.
Hopefully, we can be happy with the pathway taken, I know I can't think of anywhere to get free money so this method means we own ALL 100% of the farm, currently, and our equity stake remains similar and if we take up the offer is very close to the original equity stake.
There is a cost to taking up the offer, but that cost turns into an investment.
As a shareholder invested for the long term I find it very appealing.
Good luck all
Selfwealth below.
Pro-Rata Entitlement OfferUnder an entitlement offer, sometimes also referred to as a rights issue, shareholders are entitled to buy a certain amount of shares in the company at a fixed price. The amount of entitlement shares you are eligible to buy is based on a pro-rata calculation of your existing ownership. For example, 1 new share for every 5 shares you currently hold (i.e. 1-for-5 offer).
When the stock is released from a trading halt, retail investors have a window, typically several weeks, to apply and receive their shares. The entitlement offer may be conducted on an ‘accelerated’ basis, which effectively means a shorter timeframe.
This type of capital raise
allows shareholders to reduce the risks associated with ownership dilution. Each investor can participate and receive a quota of shares in proportion with their existing ownership. Shareholders may also have the option to apply for additional shares on top of their entitlement as part of an oversubscription facility, however, there can be no guarantee that such a facility will be available or that such requests are not subject to scale back, either in part or in full.
An entitlement offer is often accompanied by an institutional entitlement and/or placement on the same price and pro-rata terms, albeit with that section of the capital raise offering shorter settlement to the parties involved.
