Reality of a Rollback
In virtually all cases of a rollback of shares the share price will tend to drift back down to a lower level. If the overall market environment for resource shares stays weak, then there is a high probability that the shares will still drift lower. Those shares above at C
.40 may drift back down to C
.30 or much lower. The question always is, ‘how low can they go’?
Some of the juniors and exploration companies seem to do nothing through the years except to sell stock. Those monies are used for exploration and paying salaries of management but then it is time to do it again, and again, and again. Investors must filter out those companies which have a pattern of constant diluting the holdings of current investors while management continues to earn, sometimes, large salaries. Unfortunately, most of the time, additional shares are sold in a weak market with a low share price. Many don’t seem to have any sense to sell stock in a rising market which is probably a good indicator of a management team you do not want to follow.
Our Opinion on Rollbacks
Normally, if we own shares in a company and a rollback is announced we will choose to immediately sell our position knowing that the share price will drift back down at which point we may decide to repurchase the shares or just ignore them all together. Remember, the reason for the rollback is normally to raise the price to make it easier to sell more shares.