An underwritten recap would actually be welcome, dare I say even for current shareholders.
As at half year NOD had 18m of net debt. Suppose in a worst case scenario the recap was done to provide working capital/wipe out net debt, the company would have to issue 18m worth of new equity at these prices, or about equivalent to the current market cap. The discount to the current price would be dependent on institutional demand for shares, since due to liquidity and scarcity factors, instos would be willing to pay a fair price for stock (but still at a discount perhaps).
In this scenario this would be dilutive by a factor of 1:1. For giving up half your stake in the company, you receive a solid going concern with admitedly unproven turnaround prospects, but with exposure to an attractive sector. This is the exact equivalent of buying NOD shares at say 30c, but with a post-cap rasing balance sheet/share register. Is NOD worth buying at that price? It fetched 50c even after the first downgrade not too long ago...
Additionally projects aren't entirely funded by internal working capital, I'm assuming contracts are paid incrementally so as to support the project over its life.
A boring and abandoned horse sure, certainly no LYC or AVO, but I'm sure on ppl's watchlist...
NOD Price at posting:
12.4¢ Sentiment: None Disclosure: Held
