Adanac Molybdenum Corporation AUAYF

Market misunderstands reorg

[AIGswap]

I don't understand why the shares traded at
.06, which is roughly 500% above management's estimate of value.

At the current price of
.06, the market is saying that the company has a split adjusted share price of $9.00 and an enterprise value of $229 million. This is tremendously higher than the total outstanding senior secured creditor claims of $136.4 million and management's estimate of value of between $30 and $50 million (see p.17 of the PIL: https://www.kpmg.com/Ca/en/WhatWeDo/Advisory/TransactionRestructuring/CreditorlinkSites/Adanac/Documents/Plan%20Information%20Letter.pdf).

If the shares trade in line with management's view of intrinsic value, they will be at a post consolidation price of $1.18 - $1.96, implying a loss to those who bought at
.06 of between 78% and 87%. Ouch!

However, in post reorganization equities, the price generally comes under pressure upon emergence from bankruptcy due to the selling pressure from former creditors. Therefore, I expect over the next few weeks for the shares to trade for less than intrinsic value.

I may take a look at buying these shares at around $1.00 - $1.20 (about
.006 in today's share count). This would imply a decline of about 90% off of today's price, which isn't unrealistic.

I have one question though - who was buying today and why? Why not wait a couple weeks and get shares 90% cheaper

[ehmu]

Just a few thoughts on your query about valuation for AUA.The undervaluation of the project was a result of:1. the uncertainty in the public sector regarding the validity of the mine site as presented by the dissolution team to the courts.2. the exorbitant costs of dissolving the company, to the advantage of the underwriters and disadvantage of the shareholders.3. discounting the value of

[Earlyone_1]

Looks like you called it correctly.

[coquitlam]

good call......but I have little trouble understanding why would the creditor try to sell share in the hurry and pushing the price down, wouldn't they benefit to not be so agresive in selling.......I would speculate that maybe pp is coming and brokers are shorting the stock, since today after run to $3.50 there was intent to push shares down, they were hitting bids so hard that share dropped

[AIGswap]

The downward pressure was not shorts.  If the stock was available to short - I would have shorted it.  Before the stock split, many brokers don't let you short a .06 stock nor would they be able to find the borrow.  The newly issued shares also won't be shortable for about a month or two (as is the case for new issues).Also, in Canada there is the up-tick rule, which