Bluegoose, they are hardly doing this for charity. But I agree - the deal was particularly dilutive to their existing shareholders who they must have realised were no longer entirely the disinterested and desperate healthcare inveastors who'd come to them for the project and company saver.
I think it speaks volumes about what is going to happen in the future. They have actually done really well out of this; they have a decent business model (freehold land with 1 Gt of magnetite to sell to domestic steel mills? bonus), a hell of a lot of personal equity in it now, plus a cheersquad of blithely optimistic day traders who'll get their share price back up to 10c once some good news comes out, and they can raise spondoolies without totally doing themselves in the ring hole.
From the vendor's POV, they have a) backdoored into a listed shell b) installed themselves as a major controlling interest c) issued sufficient equity to give themselves a decent market cap d) Attained a significant uplift (to ~$7M and counting) and spent as little of their own money as possible e) mostly kept out of the limelight f) look set to raise significant equity from third parties, which due to their dominant equity position already, will only slightly dilute their interest in the project.
The old management have ticked their boxes, too. a) Avoided bankruptcy and insolvency for NSL Health b) Found a way to get out of their dominant managerial and equity positons whilst c) Increasing the price of their securities by double d) Learned the mining lingo well enough to not seem like jackasses or ignoramuses (but they don't really know exactly what they are doing, being shadow puppets) e) Are about to be diluted to minority shareholders, but pending a good run in share prices again (say, to 10c or 20c) and strategic resignations for 'operational reasons', they'll be able to exit for no nett loss (should keep their wives happy) and can go on to bigger and better things f) Or they leave their residual interest and let some other guys do all the work
The only losers, really, are the guys who bought NSL for 12c or the guys who worry about the equity dilution.
Thing you have to remember is this: vendor equity recognises the fact that NSL is toast without a project. No one will risk their cash for a shell (KOR's little babies aside).
Secondly were the Board to give you a pro-rate entitlement issue instead of diluting you all with a $25M capital raising via some shadowy unspecified "investors" which further dilutes you, odds are that only 30% of the money which is aimed to be raised would actually end up being raised even in a good market. One of the better entitlement issues recently was VCn and they got around 50% uptake. The shortfall has to be picked up by someone - a broker and their clients - or the entitlement issue might fail, leaving everyone up the creek, sans oars. Its too risky. Better to get a serious set of investors ("sophisticated") who are willing to take a measured bet, and who can do $25M because they can do $25M. At least the monety gets raised.
In a way, you should be happy they aren't coming back to your pockets time and again. You have limited cash, on average, and its compounding your risks. New money into the company de-risks your investment. The price is dilution.
NSL Price at posting:
0.0¢ Sentiment: Hold Disclosure: Not Held
