It appears many of you do not understand how dilution & a company's market capitalization works.
Prior to the prospectus offer & acquisition shares, the company had 718 million shares on issue, with an undiluted market cap of $21.54 million (at a share price of $0.03).
When you add the:
Prospectus shares - 320 million
Vendor shares - 640 million
Advisor shares - 15 million
The amount of total shares on issue increases from 718 million to 1,693 million or an increase of 136% of the company's previous share capital.
Firstly let me point out, if they were to have raised at 3 cents, the prospectus shares would only have been 267 million, as opposed to 320 million i.e. 53 million less. Do you know what percentage of the total shares that will be on issue that is? It is basically only 3%, which is equivalent to the additional dilution us shareholders face due to not raising at 3 cents. Something to worry about?
This additional dilution is more than offset by the vendors deciding they are happy to cancel what would have been an additional 320 million options, converted into ordinary shares at a later date. In this sense what would you rather have had - an additional 320 million options or only 53 million additional shares?
Now back to my original point, if they raised at 3 cents the total market cap of the company at this price after the additional shares mentioned above (adjusted for 53 million shares less due to a higher prospectus price) would have been $49.2 million ($0.03 x 1,640 million share).
But at a 2.5 cent raising and share price the market cap of the company will be $42.3 million, as indicated on the Prospectus Capital Raising announcement.
The institutions, by accepting the 2.5c / share price have essentially confirmed that they believe the company to be worth around $42 million, not around $50 million if raised at 3c, and much higher than the $21.54 million (which would have been the market cap without the prospectus shares & vendor shares).
So can people please get over the 2.5c vs 3c raising price, in the scheme of things it is very minuscule in terms of dilution.
As I mentioned previously I believe we are seeing a bunch of retailers exit the past couple days due to worrying about nothing, and you will find smart money will take over shortly.
Sure these guys could have waited another couple months to raise at a higher price, but would it be worth it? When you consider that the IoT sector is white hot at the moment and first mover advantage is critical, it is much more important to raise capital now than allow a competitor to leap frog you.
Have a re-read of the company's presentation + prospectus and understand what opportunities they are being presented with within the next six months - then you may understand just how real world businesses work.
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