Some possible answers:The biggest question that needs to be answered at this point is:
why was the financing done now at a point when the stock is the lowest it has been for more than a year? Do they need the cash now? PTA web-site says they have $13 million plus letters of credit available to them as of March 2011, why not use that cash if it’s an emergency and wait until the share price is higher to do any equity financing given that news on Balay wells are pending? My 2 opinion answers:
1. They were approached by the largest shareholders (Magid Sam, Columbia Wanger Asset Management, may be Sprott?, Radcliffe foundation, etc) to do an equity financing at this low price so that these shareholders can average down – of course they are the ones who have suffered the largest losses so far due to the steep drop in the share price and would be something that management wouldn’t mine doing as a reward to those shareholders for staying with the company. They would have been given the priority as part of the agreement with PTA and the underwriters to be the first to buy shares at 20 cents and is the big reason all the shares have already been taken.
2. A less likely reason would be that those underwriters (especially Raymond James Ltd) approached the company to do an equity financing to take advantage of the low share price to benefit their clients. Once their clients get shares at 20 cents, they can easily sell at 25 cents and make a 20% return on their investement – of course this scenario would be cause for legal investigation/action as it would mean some in management is tied to clients of the underwriters otherwise why in the world would management agree to such a scenario – it would surely not be in the interest of any shareholder but only clients of the underwriters (some of whom could be shareholders alread)?