GPX: The next 5 months - great times ahead, page-3

To put the above example by reiners into some context...

Let's assume you recently bought shares in GPX after doing some research into the expandable graphite sector.

You decided to buy a pilot parcel of 20,000 GPX shares (e.g. $5,000 @ 25cps) with the intention of increasing your holding during the equity raise component of the Castlelake funding package (assuming the criteria required to unlock the funding package has been satisfied).

Now, the current terms of the equity component of the funding package allows existing GPX share holders to participate in the equity raise on the same terms that are offered to Castlelake, (so long as Castlelake's final shareholding is not less than 40% of the final share register).

The equity component will be undertaken at a price equal to the lower of:

a) 10% discount to the 15-day VWAP (prior to the equity raise) or;
b) A$0.28 per share

Now, assuming the equity raise is undertaken at 28cps (using reiners example), and say, existing shareholders are offered to participate in the equity raise up to the value of US$5 million (again, using reiners example), with the remaining equity being offered to other institutional clients ($US 5M) and Castlelake subscribing for the remaining US$20M, (in order for them to maintain a 40% share holding interest) then the GPX share holder with 20,000 shares would only be able to subscribe for 1 additional share for every 4 shares they hold.

In this example, the additional shares that this share holder would be able to subscribe for is ~5,000 shares (or $1,400 @ 28cps).

This allocation assumes all existing GPX shareholders subscribe to their full entitlement (which I imagine most would subscribe for, given the company would be using the funds for construction to become an actual graphite producer).

Now, if this particular share holder who bought with a pilot parcel of 20,000 shares is happy with an additional 5,000, then happy days for him/her.

However, say you are an investor who is currently sitting on the sidelines awaiting the equity raise with the intention of increasing your holding from say, 20,000 to 200,000 shares. In this particular example, you may not be able to subscribe for an additional 175,000 shares (if all existing shareholders subscribe to their full entitlement). Now you may get lucky if some share holders don't participate in the raise, but if there are a few serious investors sitting in the shadows who all have the same intention of trying to buy a decent stake in the company during the equity raise, then they may be left disappointed with how many shares they are awarded.

Now, you can always buy more shares on the market after the equity raise, but it wouldn't be at the same price offered during the equity raise, but rather at a significant premium (as the company would now be fully funded to production).

PS.
As mentioned, the above post is just to providing some context to reiners post (using the share structure example in his table).

How individual holders like to manage their risk is entirely up to them, if you're someone who prefers to wait until the company is further de-risked (e.g. after funding has been secured), then you have to accept that you will most likely be buying at a premium to the price offered during the equity raise, along with everyone else who missed out.