What can we do about dilution? We can change the impacts of dilution by simply buying more shares, there are plenty to buy. It is a question of whether it is worth the risk, and that is up to everyone to judge for themselves.
We aren't at the level of dilution that would have occurred if the options had have been exercised. Of course if they had have been exercised the sp would be somewhere around 8c but the bottom line is that if the options had have been exercised there would have been a 25% dilutionary effect on anyone not converting options.
So before Bergen, there were 452,069,815 shares on issue. There are now 521,176,328 on issue, an approximate 15% increase in the number of shares and therefore a 15% diltutionary effect since Bergen. So if you have increased your holding by more than 15% since October last year then there is no dilutionary impact on your holdings. Also, if you have done this then it is likely you have also brought down your average price as well.
It will require the issuing of a further 45,610,093 shares before we get to the level had the options been converted.
Whilst Bergen have a negative impact on the share price, and we all hate this, the Bergen deal means we can all bring down our average price while keeping our proportional holdings steady. The money the company gets from Bergen keeps them afloat where nothing else could or would. And remember that most of the board are working for nothing. Two important points to remember.
The company still has the capacity to issue another 47,897,277 shares under the placement capacity rule by November (15th of November was the date of the resolution). Of which approximately 16,000,000 will be issued as part of the monthly tranches. Of course we expect some ad hoc issues as well, previously the ad hoc issues have been around 16,000,000 shares. If the same again, that puts the total issue before the next AGM at somewhere around 32,000,000. A sizeable chunk, if this is added to the number already on issue, eg 553,176,328, the proportional increase from October last year is 22%. So if it remains plausible that IB can pull this off then it might seem reasonable to keep holdings inline with the dilutionary effects, I am not suggesting anyone do this, although I have. Make no mistake that the dilution is a necessary evil of keeping this show on the road.
The question is time now, once the Bergen deal extends past November (which I believe it will) the dilutionary impacts will start to truly mount up. The company has to be able to show that it is creating shareholder value over the next 4 months for the company to expect to keep shareholders on side. The next AGM could be a doozy. Barring any further delays the DFS should be about ready by October, it is going to be a nail biting finish. The test work and the DFS are all about proving the business plan and hence creating shareholder value. Believe me I completely understand bubsmark's nervousness, just may be for different reasons. Good luck to all.
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