Lots of excitement about the CR, but it is really following the...

Lots of excitement about the CR, but it is really following the standard pattern of this things.

1) The first day after a CR lots of people want to get out and take a profits on their newly acquired stock while the more enthusiastic buyers take stock at the lower price.
2) CRs are usually pretty large, so there is normally an overhang of stock that gets sold into the market over the following few weeks which results in the share price drifting lower
3) If the market thinks the CR was a good idea, the share price stabilises at around or slightly above the CR price, if not it sometimes falls below the CR price (this happened with DRO last time because they took cash that they don't need)

If I remember correctly, the Tadpole sold out on the first day (this is what I would have done as well) and will be able to use the proceeds to buy back in at much lower prices and probably be able to increase his stock by 20-25% at no extra cost (assuming he still likes the stock after this). He won't take up the SPP until the last day (if at all) to wait and see whether the stock drops below the issue price. My guess (it is only a guess) is that it will.

I base that guess on the fact that this CR is a big negative for DRO.

One of things that no-one seems to be talking about on this forum is that Oleg claimed that DRO required $70 M in the issue presentation. Much of that money will be spent gradually over time, and it already has an excess $50 M in cash that it is not using and is cash flow positive. Why on earth did it need to sell yet another 37.5 M shares further diluting the stock (and that's before the SPP)?

After this CR DRO will have at least $160 M in cash. Even if it spent the money that it claimed it would on day one it will be left with around $100 M in unused cash that it doesn't need. Meanwhile the number of shares has exploded to 800 M.

To put that in perspective, during the period since the beginning of last year, DRO has turned cashflow positive, has had no major capital expenditure yet has nearly doubled the shares on issue. A lot of posters here think that is ok. I wonder whether the market will, particularly if the tailwind weakens.