Hi PATROLLY,As you know there are multiple types of people...

Hi PATROLLY,

As you know there are multiple types of people buying shares but for simplicity lets break them down into two groups, short term and long term holders. My comment relates to holders with a longer term view as opposed to anybody that thinks a 2c share price for MST is anything to aspire too.

So MSTs share price has bottomed out at 0.008. The rights issue @ 0.01 represents a 25% premium to the current market price. Since the rights issue is fully subscribed its clear that some investors took the view that paying a 25% premium to get a bunch of options for a much higher strike price was worth it. But why ?

By my reasoning you would only pay a premium to buy the RI shares if you had a longer term view of the shares rising conciderably. And I'm not talking about 2c. If you aspirations for the share price were as low as 2c then paying the 25% premium now wouldn't be worth it. Either this company dies from inhaling its own BS or it makes some big sales and the share price rockets. Nobody took up the rights issues thinking the former was the most likely outcome. So we aspire to a medium term SP of 5-10c.

If I put in $10k into the rights issue I would get 1,000,000 shares and 3,000,000 options. I have $10k at risk but loads of potential upside. So I sell the 1,000,000 shares on market for 0.008 or 0.009 taking a $1000 or $2000 capital loss which I offset against a profit elsewhere. In effect this means that its only $500 to $1000 that I have written off but I now have no money at risk whatsoever.

In effect I now have 3,000,000 options which have cost me somewhere between $500 and $1000. If MST doesn't make a turnaround the options arn't worth anything but if they do the options have loads of upside at a dirt cheap price. Doing something like this serves investors who want exposure to MST hoping for a big turnaround over the new couple of years but don't want large amounts of cash at stake for doing so.

So why would somebody sell 6 or 7mil shares to take up the offer ? Because they wanted exposure to the upside offered by the options and throught the small premium for taking up the RI was worth it. Holding an existing 6mil shares at current market price means they have $48,000 currently at risk. The RI would allow them to buy 1,500,000 shares for a total outlay for $15,000 and give them 4,500,000 options.

Knowing that they will soon get their allotment of shares and options they sell their current holding of 6mil shares and put the $48,000 back in the pocket. They now only have $15,000 at risk but maintain most of the upside.

Simple really. If you have low aspirations and a sort term view this makes no sense. If ont he other hand you believe MST will turn around and are willing to take a 2 year view then it makes perfect sense.

I hope this helps