$40 cents club, page-877

Periculum - As you so often do, you've given HotCopper posters in here an intellectual challenge - this time to try and work out what shares in RED (or whatever it changes its name to) will be worth post the SLR takeover.

For what it's worth, I'm guided by what the market thinks at this point (ie what the market capitalisation of the two stocks is at this time).

Based on that, I have to agree with scittyandcross' post and his maths that the shares would look to be about 29.5c. But I'd add a qualification or two.

By their own admission, the merger partners don't know what the fate of the RED shares owned by SLR is yet. If they're sold to institutions etc then the merged entity has $130m odd in extra cash. If instead they're cancelled, then, in effect, the merged entity could have about 6% LESS shares on issue. The clarification of this aspect may affect the post merger price.

Secondly, SLR and RED go from being entities with a $1bn market capitalisation each to a single entity with a $2bn market cap. This could possibly result in the merged entity achieving sufficient size to be included in indices which the current two companies aren't big enough to qualify for. To the extent that this occurs, there could be some extra demand from passive investors seeking to achieve "index weight" in the stock.

As stated above, my maths is based on the position AT THIS MOMENT. The share-prices of SLR and RED have both been considerably higher in the recent past than they are at the moment. Higher AUD gold prices and improving sentiment for gold stocks in the future will push the share-prices of Aussie gold stocks higher and the share-price of the SLR/RED merged entity would also be a beneficiary.