Would all those machinations be legal or just nearly legal?

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tonethegroan

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28/01/25

14:29

Post #: 77588511
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Originally posted by Timorlad: ↑

Let’s take a step back and re-evaluate this scenario from a different perspective.

It might actually be more beneficial for both the shareholders and Eastrella if Ratta refrains from exercising this option at this time.

From the shareholders’ perspective:
Consider this alternative: Suppose Daws and Co. explore opportunities to secure $1 million in funding to support the upcoming campaign. Instead of Ratta exercising the option and diluting the registry by 250 million additional shares for $5 million, this approach would only dilute the registry by 33 million shares for the $1 million required.

This would significantly minimize dilution, preserving greater equity value for existing shareholders while still meeting the immediate funding needs of the campaign.

Key Benefits of this Outcome:
Reduced Dilution:
By avoiding the execution of Ratta’s option to dilute by 250 million shares, and instead opting for a smaller capital raise of 33 million shares, shareholders' ownership percentage is better protected.

From Ratta’s perspective:
It might be risk and strategically unwise for Ratta to commit $5 million at this stage, especially when no drilling has yet commenced in Timor-Leste.

A more prudent approach would be to wait and potentially exercise the option closer to a share price of 10 cents, maximizing their advantage.

Let’s explore a hypothetical scenario:
By mid-year, assuming everything progresses as anticipated and Eastrella confirms the manganese reserves we all expect, the share price reaches 10 cents. Under the current option agreement, Ratta has until 90 days after the feasibility study’s release to exercise their option.

At this point, Ratta already holds approximately 60 million shares. Over a five-day period, Ratta could sell its entire 60 million shares, strategically driving the share price down to 7 cents with an average selling price of 8.5 cents.

This results in $5.1 million in proceeds.With the 10-day VWAP sitting at 7.5 cents, and factoring in the 20% discount from the option terms, Ratta could re-enter the market at 6 cents per share.

This allows Ratta to acquire approximately 85 million shares—significantly increasing their holdings. While there would be capital gains tax liabilities, this strategy establishes a much higher starting point for future capital gains events.

The key benefit:
Ratta effectively avoids needing to directly fund this move.
The $5.1 million required for re-entry would have been indirectly funded by their initial $350,000 investment in securing the option last September. This approach allows Ratta to leverage timing and market dynamics to maximize returns while conserving resources.

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Would all those machinations be legal or just nearly legal?

ESR Price at posting: 2.7¢ Sentiment: Buy Disclosure: Held
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0 Great analysis

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