Peregrine Diamonds Ltd. PGDIF

RE:RE:RE:RE:RE:RE:RE:RE:3 Business Days left

[justanormalguy]

Good answer Main.  Mill, I will provide some numbers below.  If I were a Quebec or US resident, I'd be pissed.  Generally companies will set the rights price to a number or exercise price that they feel the market will buy into and almost always below the current price level, and offer warrants as a sweetener.  I would have liked it to have been a bit higher.

I am not a financial expert so I keep my analysis simple and keep the numbers approximates, and try to use a little common sense.  I like simple.

Your average price before the rights issue is irrelevant.  If you had an average of 50c and just prior to the rights announcement the market price was 40 cents, you are already down 10 cents. Therefore, 40 cents is the starting point.

In theory and in a perfect and rational world assuming nothing changes, the enterprise value (Debt + Equity) should not change before and after the rights announcement.  I will use the following equation to demonstrate.

EV= D + E
Assumptions: Before rights announcement, price was 40 cents.  The company or you have 50,000 shares or $20,000 in equity.  Company has no debt or cash on the balance sheet.  Share price remains at 28 cents.

$20k = 0 + $20k

You exercise your rights - 25,000 shares at $5,250 for 21 cents per share.  Therefore, the company has $5,250 in cash on their balance sheet to invest in further exploration.  The enterprise value theorectically doesn't change.

$20k = -$-5.25k + $25.25k (you have 75000 shares at an average price of 34 cents)

Now the warrants kick in.  You buy another 25k shares at 21 cents.

$20k= -$10.5 +$30.5k (you have 100000 shares at an average price of average of 30.5 cents)

The market is priced now at 28 cents, therefore in theory is 2.5 cents short.

What we hope for is that the $10.5k the company has in cash for exploration will provide 2.5 cents per share in value.  Then you are even but still 10 cents down on your original purchase.  Anything that would provide 2.5 cents or more of value from this investment is a gain and good and will reduce your original 10 cent loss. Of course, that cash the company has could prove as a poor investment and  no good results, then the stock price gets hammered.

I think I've done this right.  If anyone has anything to add, please do and correct me if my simplified analysis is wrong.  There are a lot of external factors that come into play as we all know.