Part 1 of 3 - Another Scenario PART 1 of 3 – Outsider Buyer Scenario
Interesting scenario Ekim on the FOF. I'm pretty sure some dissidents and their experts would have a lot of fun with this, if it were the case.
This scenario would leave about 100 million shares in the public float. Anything is possible, but I suspect a lot of the longs that really understand what they've invested in, the basement ultra conservative NPV PGD produced IMO, and the upside potential of the whole district at Chidliak would laugh at $0.5 per share. I would.
If those approx 9 million shares held in the public float by 6 people outlined on your blog are still valid and who are all still long and patient, vote against, there's 9% against right there. And that is only a very tiny pool of public investors in the realm of things.
Although, there many ways to skin a cat.
Let's spin this permutation another way. Let's assume that FOF are actually not FOF. They are potential buyers (BUY) that want to bid on Chidliak. could be one, or could be two acting in concert (ie. two firms joint venturing for 100% buyout of Chidliak). I presume they would have an idea of “the price” to get the Friedland's support and the Board's support. So one, or both, each purchase 10% of 340 million shares, with the intention of putting together a bid for all outstanding shares. One or both parties can save a lot of money by getting their 10% respectively cheaply from the public market right now.
Assumptions:
Average share cost for 10% for each BUY = $0.20/share
Fully Diluted = 360 million shares
Friedland's, BOD Buyout Price = $0.5 to $2 per share
Equity Value = Enterprise Value (ie no cash, no debt)
The point is that the BUY (or both) can buyout the company at “the price” and save substantially $ by purchasing their 10% at cheap public trading prices versus owning no shares prior to bid.
“the price” = $0.5 per share
PGD Enterprise Value = $180 million
Savings = $9.9 mil (One BUY), $19.8 mil (Two Buy)
“the price” = $1 per share
PGD Enterprise Value = $360 million
Savings = $26.4 mil (One BUY), $52.8 mil (Two Buy)
“the price” = $1.5 per share
PGD Enterprise Value = $540 million
Savings = $42.9 mil (One BUY), $85.8 mil (Two Buy)
“the price” = $2.0 per share
PGD Enterprise Value = $720 million
Savings = $59.4 mil (One BUY), $118.8 mil (Two Buy)
As “the price” goes up, there are substantial savings that can be made by each BUY. Not a bad tactic if one has a handle on what “the price is”. If it's $2 per share, they just saved more than the capital cost of the all-season road. And I couldn't understand why BUY would even use this tactic for $0.5 per share, waste of time and money for little savings.
All the above in $CAN. My guess in this permutation is that one or both entities have access to $US. Over the next ten years, I this there is a much better chance the FX hits 0.85 than 0.65 and they can make a good dime on the FX rate alone.
Part 2 of 3 (coming later) – Enterprise Value versus Chidliak (6/7) NPV
Part 3 of 3 (coming later) – My Rationale for Chidliak NPV and “the price”
Normal Guy