potential of hgo, page-6

galloper, if HGO really need the funds then current shareholders would be better off if HGO sold ESG shares instead of diluting our holdings by issuing more shares. Why? - because the value of HGO's ESG holding is not currently reflected in the HGO share price so to 'raise' $6M by placing 40M shares at $0.15 (effective what they have done with the last couple of cap raisings) will dilute current shareholders 'portion' of ESG by 10%. Whereas if they sold 10% of their direct ESG holding i.e 1.8% of ESG that would give them over $10M at current market price. Sure they could hold on to their precious ESG shares longer and realise a greater overall income for HGO but individual HGO shareholders lose out.

example:
Imagine HGO's esg stake was valued at $120M whereas HGO's market cap was $70M (From last co presentation). If ESG asset is realised now then each HGO share is worth 120/70 = 1.71 times current market HGO price.
To raise $6M HGO have to issue approx 10% more shares (placement is at discount to market price) - they have done this. Now the $120M ESG stake has to be divided amongst 110% of original number of shares in HGO. If ESG asset is now realised then each HGO share is worth (120 + 6)/(70*110%) = 1.64 times current market HGO price. If instead HGO had sold $6M of their ESG to raise capital then HGO shares would be worth (120-6)/70 = 1.63 times current HGO price. Not a lot of difference BUT when ESG rises (which most expect it will) the dilution has a much more significant impact.

Assume what happens in both scenarios(placement vs asset realisation) for when ESG doubles:

$6M raised by placement gives (120 * 2)/70*110% = 3.12
$6M raised by selling small ESG stake gives ((120-6)*2)/70 = 3.26

Again for ESG at 3x current market cap gives
Placement = 4.68
Asset selling = 4.89

Plus if you add in the dilution of current holders stake in other HGO assets we are getting screwed by all the placements essentially below book value. Management need to realise this and stop 'giving away' the ESG asset via private placements. They are better off to realise its value now (only a very small portion to cover whatever cash they need) or look to secure debt funding using the ESG asset as security.

Sorry for such a long post, hope it makes sence and you can follow that not everything is as simple as it may first seem i.e as a current HGO shareholders we are actually better off long term if they sell part of the ESG holding. Downside is the company itself will grow less quickly i.e they won't get as much cash from the ESG asset to expand BUT we will all have a much greater share of the company which evolves.