The "merger" documentation released so far indicates they...

The "merger" documentation released so far indicates they haven't decided what to do with SLR's shareholding in RED yet.

Logic would suggest keeping the holding for the moment will help SLR thwart any competitor emerging for its takeover bid for RED.

Assuming the "merger" goes ahead, the company could then decide to "sell" the block of RED shares and, in effect, raise a bucket of cash. That cash (and SLR's existing pot of cash) could be used for operational purposes within the business, or as capital to help fund a takeover of some other under-appreciated gold stock trading below intrinsic value.

As for the flooding the market with RED shares and flattening the share-price, it occurs that once the merger is approved, the new entity may find itself having a higher weighting in various indices. As such, that'll create extra demand for the shares from the index-hugger institutions which, in turn, will help support the share-price.