18 for 10 rights issue, page-31

I think this rights issue puts everyone in an unfortunate predicament (myself included). Management hasn't helped themselves, although the GFC environment means that management do have a reason for why they did what they did with Bergen (and speaking as someone who lost their job during the GFC because the company I was in couldn't raise any cash at the time, I'm sure my old employer would have preferred a Bergen-type lender, as predatory as they are, because at least the company would still have existed now and kept themselves afloat till things got better).

However, GOA management can't stuff up what is a potentially world class asset plus a couple of smaller ones. They still have inherent value.

Ergo, the predicament for shareholders. Do you cut and run, or wait for the long haul.

On balance, I think shareholders should think very, very carefully if they decide not to take up the rights issue.

At current price of 0.2c, we have a market cap of $8m. If we add the $6.9m to it (excluding discount/fees), we have a market cap of approx $14.9m. Freefire currently owns 20% or 25%? I can't remember, so I'll use 20%. Mr Chan currently has $2m of the $8m market value. If no-one takes up their offer, then Mr Chan has already committed to the whole lot. He's just gone from 20% share of the company to a 59.7% share of the company ($2m/$8m before placement then becomes ($2m+$6.9m=$8.9m)/($8m+$6.9m=$14.9m), without having to offer a premium, or announce his intention to the market, because the rights issue is specifically excluded from any takeover announcement rules. If I was taking over a company, I'd much rather start from 60% shareholding than 20% shareholding, and I'd do it via a rights issue with a compliant existing board.

Things to consider:

- Freefire aren't stupid.
- They have board positions coming onto GOA
- They are so confident that they have underwritten the $6.9m.
- GOA management are confident, otherwise they would have tried to raise a quarter's worth of cashflow, not an annual amount.
- Freefire are so confident they have advanced $1.5m immediately, without even caring who, if anyone, is taking up the rights offer.
- Freefire is happy to announce (albeit without any specifics) it's willingness to assist in the raising of capital for mining in due course.

I think freefire is picking up a company for a song, and they are there for the long haul. And good luck to him for doing so. The only way he's going to pay a fairer value is if everyone else takes up their entitlement, and doesn't let him creep his ownership from 20% to 60%. "Creep" isn't even the right word, because he's going to have 3 times as much of the company, at a discount, all within a few weeks. "creep" implies "bit by bit". What Freefire are doing are taking over the share-register with a sledgehammer.

On balance, I'm taking up my entitlement, if only to maintain my current same percentage stake in the company and not be diluted by the rights issue. Those who are left at the end are going to extract closer to the market price from Mr Chan when he eventually announces his full intention.

But he'll be hoping that no-one takes the offer up in the interim.

I just hope like hell that I'm right!