what a joke, rights @ 1 cent, page-8

Hi pesa,

I agree with you that the price is fair but I'm not sure that in the current market "fair" is enough encentive to get people to pull out their wallets which is the the point of the exercise. A failed capital raising is a costly exercise which achieves the inverse of the intent.

While you may be right about price manipulation the fact is anybody can buy stock 10% cheaper than the offer by trading on-market. Effectively this offer equates to buying an option for $0.001 and a share for $0.009. Since the options arn't listed and may go even further under water assuming further capital raisings and dilution of heads, they cannot be easily valued nor liquidated. The inability to liquidate the options will mean most people won't place any value on them and thus have no incentive to apply for them.

I maintain that if they had adjusted the numbers to a 1 for 2 @ $0.005 then most holders would take up the offer. As it stands I can't see that many holders participating unless some other force pushes the market price higher and the offer is in the money.

I do acknowledge that the lower the offer price the bigger the impact of the market price however it needs to be recongised that it has an equal downward impact on your average buy price thus there is no nett impact for people who take up the offer. The SP may be lower but so is your average buy price. This is a true incentive to take up an offer. You tread water if you participate but lose out if you don't.

In my experience pricing capital raisings at market price dooms them to failure, particularly so in bearish times. Equitable capital raisings like a rights issue are a good, fair and reasonable way of raising cash. They just need to be priced right.

I fear that they have missed the mark on this one. Unless they release some good news I believe the fact they they have put out their hands for cash will in itself weigh on the SP and this will make the offer price irrelevant.

Lets hope for good news and the offer becomes a great one.