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Hoanganh3008

27 Posts.

27/05/21

10:16

Post #: 53449039
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Originally posted by ConSpec: ↑

You aren't losing 7c per share. You logic is based on assigning a single event (the CR) to multiple events. However I will here provide an analysis.

The price prior to the announcement was 31c. (the fact that you bought it at 35c is irrelevant).

(Here I am ignoring whether insider trading occurred).

The equity raise is 28c. Now the amount to be raised is $50M, and Market capitilisation is $247 M. So the new market capitilisation should be $297M.

I am going to use abbreviated maths to come up with the weight share price. That is I am not going to do the maths in detail.

The weigthed share price is:

(50*.28+247*.31)/(50+247), which represents only a marginal decrease in the share price.

However, the Company now has cash and more focused strategic direction; so this may lead to an increase in share price rather than a decrease.

It is my opinion (although it requires a full analysis to validate) that there is often an immediate reaction to a CR to presume that the share issue price corresponds to the true share price and the share price decreases (which is your logic). Sometimes this is so extreme that the share price decreases below the issue price. (this is often a reflection of lack of confidence).

The 'memory' by the market of the CR seems to last about 6 months - but after 6 months the market returns to value rather than CR issue price.

So whilst you may see an immediate drop in share price, this may well represent a buy opportunity. I personally tend to buy shares at issue prices (or less) if available on the market.

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Many thanks for your feedback, it make sens to me

DCN Price at posting: 29.0¢ Sentiment: Hold Disclosure: Held
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0 Great analysis

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