There have been a few hints about a capital raising and so of course my little brain has been thinking about the what, why and how. A raising has been linked to a large contract or licence agreement. Let's imagine the latter. Given that there are different approaches to licencing, the size of the sales funnel that has been indicated and referencing the Moelis report I am wondering how much the capital raising is really needed.
So what is a possible scenario if this is the case, and what are the possibly relevant factors?
- We know that there is pressure to realign the portfolio to have a greater balance of institutional investors on the books
- We can probably reasonably conclude that they current key Executives and Directors do not wish to unreasonably dilute and lose the possibility to controlling decisions on a sale and sale price
- Gavin Rezos has just put his money where his mouth is once again. Sure it might be small bikkies but…….
- There appears to be strong evidence that the share price has been controlled with downward pressure by institutions using their favourite tool – bots!
- Share price pressure and resultant fatigue among retail investors has led many to sell or at least put a hold on buying to use their cash elsewhere
- institutions have not lost faith (Moelis report)
- It appears that the ability to squeeze retail investors may have lost its impact.
Normally you’d want to get that share price up so that you don’t dilute too much to get the $ you need. But if you don’t need the money as much as to distribute some shares to institutions you could:
- Calculate a reasonable number of shares to ensure that you can slowly and safely issue shares without over dilution
- Consider the price that you know (because you are in touch) your key institutional targets would be happy with
- Calculate that in relation to the $ that look respectable for a raising
- Fiddle until you have the figures right
- Manage the allocations so that no one group can acquire shares out of proportion to the control and influence you are willing to cede.
Then you change the game and let the price run a little/push successes. In other words the reverse of what you might normally expect.
It’s Machiavellian but also entirely possible. And in my view not unreasonable in context of the last few months.
So we are going to sit back, watch and ride the game.
