AlwaysLong683 wrote: Of course the current / ongoing share price matters to existing long-term shareholders.
Would it have been better for existing long-term investors for NFG to raise flow-through capital at the 8.00 that transpired or 10.00 - 12.00 a share?
I am not a fan of ATM share issue announcments as you don't know at what prices the company is issuing new shares during the process, but even if an ATM program is initiated, would it be better for existing long-term investors for the new shares to be sold at a higher price or lower price for the duration of the program....?
All else being equal, lower new share issue prices dilute existing long-term shareholders.
IMO, Kettell made a careless mistake when he decided to send that tweet on May 10 even though he's right that share price obviously does matter at the two times he referenced: capital raises and "when it is time to sell" (I assume he means the sale of the company to another entity). However, it also matters at times outside of those two types of events.
NFG closed at 7.35 the day of his tweet.
Fast-forward to the NFG PR dated August 26 when the company announced the ATM equity offering program. The share price closed at 5.15 that day and proceed to trade in the high 4's to low 5's range for long stretches over the next 3 months. What prices per share do you think NFG was issuing new shares at during this period....?
Then we get the December 7 PR announcing the flow-through offering at 8.00 a share. Flow-through shares are valued by the purchasers of the shares since they can write off the exploration expenses incurred by NFG during a given fiscal year on their own tax returns since NFG cannot use them as the company is not generating any revenues. So, in other words, NFG grossed approximately 0.65 a share from what the price was seven months earlier. If the share price had moved signficantly higher in the months prior to the raise, I suspect the issue price would also have been significantly higher.
A rising share price is not only important at times of capital raises, but also prior to those times as it is highly unlikely that the share price will all of a sudden explode upwards just before a raise only to fall back to where it was as soon as the issue transaction is closed as evident in the above two NFG raises.
The PR dated December 28 included the following text:
New Found announces that it has granted stock options exercisable for a total of 1,512,500 common shares in the capital of the Company to certain officers and directors of the Company. These stock options have an exercise price of $5.68 per option and expire on December 27, 2027.
A 5.68 strike price per option is very reasonable given where the share price sat in late December (the 5.30s), but this exercise price would have been higher if the market share price at the time was signficantly higher (wonder what the exercise price would have been if the share price had just stayed at the 7.35 it was at in May when Kettell sent his tweet....?).
Also, unfortunately, circumstances may arise where the shares of those intending to be long-term inestors need to be sold before that "long-term" date arrives (e.g. illness, unexpected financial hardship, other emergencies, estate dispositions, etc.), so anyone who has established a full position in NFG with the intent to hold on to their investment may find that they can't / won't make it to the payoff due to unforseen circumstances. so of course it's better for existing shareholders to see a rising share price over time. Anyone in here with a boatload of money already invested in NFG at an average cost per share significantly higher than 5.20 content to see the share price stagnate until the next equity raise and beyond....? Anyone think that if the share price remains in the 5.00 - 8.00 range over the long term that a buyer will offer a 200% premium to buy out NFG at 15.00 - 24.00 per share....?
I win.
;-)