duo market cap and consoldiation

Some excellent points were raised by @rypil at STT weekend thread. Those points made me think and hence I am starting a new thread so we can discuss duo market cap and consolidation effects... according to rypil, fully diluted market cap of duo will be 35m at 2c and he included options exercisable at above 5-6c and performance shares of 270m. However, I think his equation was right but lacked few important aspects...

ere is my answer:

Options included in fully diluted market cap at these prices? While options have exercise prices above 5-6c... and if you do want to include them you should also include the amount of money will be raised as a results of conversion which will be equal 5.5m approx. This will reduce EV substantially.

Also you included 150m shares of future cap raise but you did not mention the amount the cash it will raise... again will reduce EV... 3m will be raised as a result plus 2m existing cash will reduce EV by 5m.

Now by cutting these two figures from the fully diluted market cap, duo will have EV of 24.5m approx at 2c. Even by following the existing structure and including the performance shares and options, DUO has EV of around 17m at 1.3c

270m performance shares... even if we consider those as low hurdles but they are still hurdles... and with every hurdle achieved market cap will increase as it will prove the concept. However, I agree its good to consider the performance shares.

Consolidation - we don't know the ratio as yet... hence a risk but a risk worth taking... my reason? Its not the holders only who will be disadvantaged to death because of consolidation... the shares issued to vendors will be treated the same... hence a consolidation to take the sp above 2c will reduce their 700m shares plus performance shares of 270m... so I would personally be happy if the consolidation is done at 1c as it will reduce their holding by half which means market cap of duo will be educed by half... also vendors are ones holding 66% of the company if we include performance shares (thinking like a pre business man right now, which is considering my own benefit medium term). Total shares will look like this...

1. Existing holders = 293m approx.
2. Vendors = 350m
3. Capital raise =150m
4. Performance shares = 135m
5. option = 29M with 10-12c exercise price

Therefore, market cap will be like 18.5m at 2c including performance shares... and EV will be like 13m... I did not included options in the equation as its just wrong to decrease EV by 5.5m based on options exercisable at 5 times higher the share price...

In simple words, I don't see a consolidation as a bad effect for medium term share holders right now... it will actually act as a very positive thing as DUO will be heaps cheaper as compared to what is now and hence will run quicker on any news... so simply I think vendors will be more disadvantaged because of consolidation as they on a lost double amount of shares including performance shares as compared to existing share holders .... in other words it will reduce the value of deal by half for vendors. For us share holders, share price was 1.1c at the time of acquisition so worst case scenario it will come back to those levels... short term pain but medium tern advantage...

I hope it makes sense... it does to me... its a win-win situation both ways... short term approach, I would like the sp to be above 2c and consolidation at those levels... medium term, I would prefer a consolidation at 1c rather at 2c as it will be more beneficial for existing holders...

Please correct me if I am wrong in my thinking... open to suggestions...

Cheers