Thanks for an interesting post.Given the pricing of this CR, I...

Thanks for an interesting post.

Given the pricing of this CR, I expect that you'll get your wish. It is hard to imagine anyone paying such a premium to the market price except someone who wants a huge block of stock, otherwise it would be far better to buy on the market. Even then it might be worth taking the risk of accumulating on the market. Having said that, I don't really get the particular attraction of cornerstone investors, or any of these catagorisations such as long-term investor, trader, short seller. All of these are just people trying to make some money. Cornerstone investors will dump stock if they see something they don't like just like anyone else. They can also be a hinderance in a small stock because they lock up liquidity and make it difficult to trade, and if they do decide to exit its going to be ugly for existing shareholders.

At the moment FRE is speculative, and will therefore more naturally attract people who are, at least initially looking at the short term (people change their minds all the time) so that probably means more traders. People love to project about how Institutional and sophisticated investors run their eye over stocks, but of course they're not a homogenous group.

However, as an exercise, I'll run people through what I did this morning when I was invited to make a bid on a stock I'd never previously heard of. The first thing is industry and product - are those things I would be willing to invest in? - that was a yes for me (mining stocks are a no). The product seemed to have a wide potential market and be in a strong industry. The next question is what do the numbers look like (these are far more important than the story). I look at trajectory - increasing sales and this looked good. Then how far to profitability - it needs to increase sales by 20 times and that looks bad - it tells me there is plenty of time until the company makes a profit and then could be more CRs between now and then. Even if the company doubles or triples its revenue next quarter, that's not likely to do much to the share price because it will still be miles from profitability. I'm likely to reduce risk without harming the upside gains by waiting. That makes it a "no" at the moment, but I think this company is worth watching - if its trajectory remains positive it could become a "yes".

The next question is that the pricing of the offer might be attractive for a short term trade. In this case it is also a clear "no". The options are a hook without much bait. The company has to more than double in value (remember the options cost 1.8c) to become worth anything - their intrinsic value is very low. If I was really keen on the stock, I'd be far better accumulating on market. I would have put in a modest bid, if it was priced at 6.5c (a little below the market) and would have looked to exit at a small profit or neutral and kept the options. At 6c I would have gone much higher, looking for a short-term profit and the options. At 8.5c I am struggling to think of an offering that was less attractive than this one.

It took me about half an hour to make a decision about this stock.