The first question to ask is, how much will Thomson need to raise?
Let's be conservative and just assume that they will settle for $1 million. Who knows, perhaps the management are feeling optimisitic that the funds from the Texas Project deal ('Sale of Texas project', 06/12/22) will hit their bank account in the next few months.
So what were the terms of the private placement?
They created 106,252,656 new shares, selling them to Lind for AUD 0.001.
So, if the company is going to offer the same terms to all of their shareholders, and assuming they are looking to raise just a cool million, that would equate to 1,000,000,000 new shares, if my maths is correct.
Currently the company has a total of 976,204,000 shares all up. If they were to raise a paltry million at 0.001, that would mean the company would have approximately 2 billion shares outstanding in total.
Let's compare that to a couple of other silver focused stocks: Silvermines currently has around 1.4 billion shares outstanding; Investigator has about the same, 1.4 billion.
Of course, we're not exactly comparing 'apples' with 'apples' here: Those two companies have first-rate silver assets, whereas Thomson's silver projects are distinctly second-tier.
2 billion shares outstanding for a mining exploration company with fairly average projects? Hmmm.
Based on my experience, being offered the chance to top up in a company via the offer of 'cheap' 0.001 shares is a sleight of hand.
Usually, the companies that offer the rock-bottom shares will thereafter enact a share consolidation, after which the share price almost always goes into freefall.
There are some rare and eccentric exceptions, like 88 Energy, which currently has 22 billion (!) shares outstanding. But the share price of that company is as low as that of TMZ, and from where I stand, the 88 Energy share price looks as if it is caught in a downward spiral that is going to be hard to escape from.
Personally, I don't care one iota that Lind got offered a bunch of shares at 0.001. The company needed the money, and they didn't have a choice. If it kept the company solvent, then I'm fine with that. But offering the same terms to all shareholders will leave the company between a rock and a hard place. Once a company lets the number of shares outstanding blow out, it is left with few good options.
This isn't to say that the management isn't able to offer shareholders the option of buying shares at 0.001c.
What they could do, is raise capital at 0.003 or 0.004 (if they can get away with it) but throw in some attached options, which allow shareholders to buy in at 0.001 some time down the track.
If they follow this course, the management should be able to keep the total number of shares outstanding under the 1.5 billion mark, post capital rasing. I think that is manageable, but another billion + shares outstanding probably is not going to work out for this company.
Apart from the rather intimidating numbers involved, there is another reason I am charry about the idea of the number of shares ballooning out.
This time, three years ago, the Thomson share price was on the up-and-up, and shareholders were buoyant. The world, it seemed, was Thomson's oyster.
If you'd told shareholders back then that Thomson would be raising capital at 0.001c in three years, I truly suspect no-one would have believed you.
So, what went wrong?
In my view, the crux of the problem can be traced back to a lack of discipline on the part of the management.
In October 2020, they jumped into the deal with Silvermines, in which they acquired Webbs and Conrad silver projects in exchange for TMZ shares, but without giving due consideration to the downside risk: namely, that Silvermines might proceed to dump the TMZ shares, as of course they would go on to do.
In March 2021, extending their new silver strategy, they purchased the Texas silver project in Queensland. As we now know, that project was extremely problematic, and it appears that the management didn't conduct appropriate due diligence before acquiring it.
In the event, the Silvermines sell-off would send us into a downward spiral, and the problems associated with the 'widow-maker' Texas project very nearly finished us off for good.
Now, if the management decide to go for the 'sugar hit' option, trying to tempt shareholders into partaking in a capital raising in exchange of a stack of shares at 0.001, it will unfortunately be evidence that the management haven't learnt from their past mistakes.
They really need to start getting over their fixation with generating a quick-buzz, and start focusing more on the long term.
I haven't quite given up on Thomson: I'm a remarkably forgiving shareholder, and besides, I feel that the company might still be able to extract itself from the quicksand it is currently caught in.
However, the company is now at a critical juncture.
The current situation calls for discipline. If they throw caution to the wind once again, going for the superficial route, throwing around bucket-loads of shares like confetti, well, I think then even I will have to admit defeat.
(20min delay)