RE:Can someone explain this immediate upsize of the bought-dealA couple thoughts on this:
It was not a mistake to issue two news releases, they followed standard procedure. Two news releases is the way it's done, because...
The vast majority of issuances / private placements (at least at this stage) are oversubscribed. I can't remember one that wasn't. That's intentional and for a reason, because frankly, it looks good. That said, most oversubscriptions are 30%-50%, and this was more than double oversubscribed, so that tells me a couple things: either 1/the interest was large, or 2/ they actually planned to raise more the whole time cuz why not, or 3/ a mix of both, which is the likely correct answer.
First the ("normal") process:
- PYR meets with various investment banks for a potential issuance, selects the bank they like
- Mackie negotiates a "preliminary price" with PYR to be the issuer (FYI, word on the street is that it's a syndicate and not just Mackie; Mackie is the prime but there seems to have been other houses that were approached to be part of a syndicate with Mackie as the lead; hedge funds may be in play too)
- PYR releases news release regarding the issue, using the prelim price and share amount
- Mackie conducts "marketing" (reaches out behind the scenes) to its wealth management clients as well as getting its sell-side guys to reach out to buy-side guys at other houses / family offices / fund managers, etc to gauge interest in PYRs stock
- Mackie informs PYR of interest level from client base
- * PYR and Mackie agree to higher issuance number (interesting factoid: they could also have increased the price of each stock, rather than the volume amount, or even do a combination of both price increase and share number increase, which might have been done behind the scenes prior, we don't know; but likely the buyers wanted more shares at lower prices than less shares at higher prices just in case, so it was negated)
- PYR issues second release announcing increased issuance
* But all that's on the surface, not likely what happened behind the scenes. They did the initial release of $5MM to clearly indicate this was to meet the specific TSX listing requirement, then the second release to show "extra interest". But this was all probably known a few weeks ago, and the interest was already established, because likely there was never any chance it was going to be just $5million. But instead of issuing for $10million in one release they issue first the $5million to again reinforce this is about the TSX criteria, when they knew all along it was headed for $10MM+.
Okay, then why didn't they raise even more with yet another increase if there was so much interest?
Because:
1/ then it starts to take away from the fact that this was about meeting the TSX criteria
2/ you start to get into higher levels of dilution (which we see on these forums pisses people off) rather than meeting a mandatory technical criteria
3/ it starts to raise the spector that perhaps they were also looking to raise capital after all, and not just meet mandatory criteria.
So oversubscribing on issues is a double edged sword: it looks great for interest and momentum, but can quickly indicate other things if it goes too far it its over-subscription.
The fact that it was doubly subscribed was perfect in my eyes, because $5milllion as a placement is very small anyways, so doubling the issuance shows big interest yet only takes it to $10million, still a very small amount all things considered. And the extra $2million to take it to $12million to me is not a coincidental number. Mackie's commission was 4%-6% plus a negotiated amount of warrants (usual IB commissions are 1.5% to 2%, but bought deals are higher because they are assuming the risk -- and this is actually lower than 15 years ago when bought deal commissions were routinely 7-9%), so the extra $2 million covers Mackie's commission of say $500-600K, plus gives room to pay Mackie warrants owed as part of the deal, and perhaps some other admin here and there for uplisting costs and marketing (fyi, there are no ongoing retainers or fees with investment banks in Canada, for any of you from the UK reading this).
Good4You wrote: from $5m on the first bought-deal PR immediately followed by the upsize of another $7m on the second PR, for a total of $12m bought-deal or about 3m bought-deal shares. Knowing Peter is an experienced Banker, he surely didn't make a mistake on his first PR? So why two PRs instead of only one with the $12m bought-deal? Are the buyers of these 'give-away' 3m shares+warrants confidential and secret? Could some of these shares be already required, reserved and made available for clients ABC...just before the BIG Contract signature$? I wouldnt mind if this was the case! :0) PYR Long and Strong Good4You