question from dan2001

G'day Dan,
I have started a new thread to respond to your question as the heading on your initial thread was incorrect as it has nothing to do with debt. It's to do with the consolidation of the shares not debt. GDA Annual report has details of a the debt position which is low.
The consolidation has been announced last year and has been referred to in the recent quarterly and numerous other announcement by the company and been discussed a lot on hot copper GDA threads since January from memory.
Your question about the share price in relation to the non inferred resource status......The share price is multiplied by the number of shares on issue to work out the market capitalisation, so in theory, a one for 10 consolidation reduces the number of shares by a multiple of 10 so the increase in the equivalent share price from 2.5c to 25c and the multiplication by 25 instead of 2.5 on 10 times less shares works out exactly the same.
From my observations over the years, a consolidation in a small company with a lot of shares WITHOUT any good news and a increase in resource knowledge or new exploration that is exciting the interest of the market, results in the market cap dropping back by a third or whatever.
On the other hand, if the company has announcements that the market likes, the market cap remains about the same and if they have a strong flow of good news, the market cap ( and the consolidated share price equivalent) can move higher.
The directors are aware of this and as a sweetener to the consolidation, have announced an attractive bonus issue post consolidation of one free share for each 8 shares held. On top of this , they have also announced that post consolidation, shareholders at the time ( details yet to be confirmed about the record/ ex entitlement date), shareholders will receive three free options for each 5 shares held by the ex date. The options will have a conversion date of 2012 which means there is a long period for the value of the company to put some runs on the board through it's exploration programs which can increase market cap further.
As an example, say you own 1,000,000 shares and no options, the shares become 100,000 shares post consolidation and you get 12,500 bonus shares to add to your 100,000 shares. You also get 60,000 options for free.
If there is a strong demand for Gondwana because of good announcements and the post consolidation share price market cap' stays the same and the heads stay around 25c and 13c for the options, the bonus shares will be about $3,125 and the free options will be about $7,800.
If the post consolidated share price goes over 25c or under 25c the calculations change of course.
History shows ( January this year) that good news, even when there was a large increase in the number of shares in the market via the successful rights issue, the share price still went up when it could normally be expected to go down by the equivalent % of the dilution factor caused by the increased number of new shares. Alternatively , I have seen many companies market cap go down as a result of a capital reconstruction (consolidation) which is not supported by good news and exploration activity. There is a risk factor that you should consider in that no one knows whether the consolidated share price (and market cap') will go up or down or remain about the same.
The issue of the bonus shares and free options look attractive to me but you should do your own research and read all the announcements from the company going back to at least November 2007. If you check out the hot copper threads going back to 1st jan 08 you will see various threads which debate the pro's and cons of the re organisation of capital.
Clear as mud? Dan, I hope the above helps a bit....dyor, my comments are not advice or a recommendation, they are just my thoughts for discussion purposes, cheers fs.

Dan2001 original post......
"debt consolidation
Forum: ASX - By Stock (Go Back)
Code: GDA - GONDWANA RESOURCES LIMITED (Google GDA)
13/05/08 03:19 (View) Back Post Reply
Options:
dan2001
Post #: 2862242
Start of thread:
IP: 86.147.xxx.xxx
Sentiment: Buy
Disclosure: No Stock Held
Views: 8

I am a holder of FDL and GDA stocks from circa feb this year, and am very new to the stocks game.

I am UK based!!

I have observed from the side lines fatstock etc putting in some very valid points on gda

I have a question and I hope its not a ridiculous one.

I notice that GDA are debt consolidating on a 10-1 reverse split on 3rd june this year-subject to approval.

I understand what this means ie 10 shares at 2.5c will become 1 share at 25c.

What does this mean for the overall share price as surely this will leave gda at 25c a share which at the current moment would seem very high for the non inferred resource status.

Any help appreciated as i have some cash and FDL GDA or Maximus are going to get it...this whole game is like juggling mercury!!

let me know folks.ta dan"