nooooooo! what is ctp doing?, page-15

@liquidcarbon

another line of enquiry should relate to the issue of selling an additional 300m undervalued shares in ctp, versus the potential of selling a further stake(s) in one or tenements via farmout at fair value (or possibly even a premium).

pre-raising, ctp has around $30m cash and a market cap of around $60m, so the net assets excluding cash (ie tenements, etc) are valued by the market at around $30m.

last year it entered into an agreement to farmout to ROG at a 2 for 1 promote across certain tenements, effectively being free-carried on a portion of its contracted drilling costs on those tenements.

this deal effectively does the opposite, selling additional stakes in all its tenements at a sharp discount. a 1 for 2 promote, as opposed to the 2 for 1 promote taken up by ROG.

this offer to existing shareholders at a steep discount honours the commitment management gave to offer those shareholders discounted equity when it entered into the bond arrangement.

yet, the same discounted offer is being made not only to existing shareholders but also to (and I'm assuming) non-shareholder institutions.

these institutions effectively get a steeply discounted entry into all ctp's assets, as opposed to an entry into select tenements at fair value or a premium to current (already discounted) market value.

plus the big winners in all this are the underwriters who walk away with a relatively risk-free fee (usually around 5%, and possibly higher given the relatively low amount raised).

if my reasoning is out, i'm sure someone on this thread will let me know.