ds, I do agree that it is a positive if the Diasource owners want to take a bigger piece of the ADO cake in script rather than cash, however do you think that it is necessarily in the best interest of ADO shareholders for this to happen?
Clearly there are positives, as it shows supreme confidence in the Anteo group going forward once the acquisition is complete, but it would also dilute current holders far more than first envisaged. I personally liked the mix of script and debt put forward in the original deal as it minimized dilution at what is a pretty low price of $0.075, and mixed in a good amount of debt on reasonable terms. I would prefer some debt component when we will have compounding growth in both revenue and profit to service it.
When I valued this deal for Anteo going forward, one of the big "wins" in my eyes, was the lack of dilution. On the current deal we were only diluting the company by circa 20%, but in return we were getting a cash flow positive company, with growing revenue and what is realistically a more complete business than our own. Based on these facts, I put a conservative fair current value on Anteo after completion of the deal, at around $0.14-$0.18.
Now obviously when you are valuing a company in the end it basically comes down to what you have, and how many shares are there to split what you have between. More dilution in this deal would instantly bring my valuation down, depending on how many extra shares are issued, so is this necessarily in my best interests? You can pay debt off and then it is gone, but if extra shares are issued, then they will be there every time you value the company going forward.
I don't think that there would be many on here that don't think that the price is going straight back above $0.10 the second this deal is complete, and I just wonder if the owners of Diasource have realized the same thing and thought, hang on, why are we taking cash when we can take cheap shares that will more than likely be worth double what we are getting them for in a month or two?
Now it would not be so bad if the extra shares issued were going to Diasource owners that planned on keeping them for the long haul, but if they were going to the major owner that was looking to "cash out", then that would put a significant drag on the sp for a period going forward. I would be hoping that there was an escrow period of a year or something around that put into place if a large amount of script ends up getting issued.
ADO Price at posting:
9.2¢ Sentiment: Buy Disclosure: Held
