GREY:TRIAF - Post by User
Comment by
aagoldon Nov 30, 2011 8:42pm
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Post# 19281413
RE: RE: RE: $1.1mm for a section at Lochend
RE: RE: RE: $1.1mm for a section at LochendOk... that was a very generic and non-quantitative answer. Can you be more quantitative? I'm asking you specifically because you seem to be quite knowledgeable in this space.
1) Would you agree that when a company has positive cashflow from operations (which is the case for TOL) then there is nothing *forcing* them to raise capital? If the stock price is too low, a company always has the option of limiting capital spending to its cashflow from operations rather than diluting the shareholders, right?
2) Assuming we agree on (1), then the only justification for issuing new shares at a price far below fair value is that the shareholders is *getting more than it's giving up*. Well, is that the case here? Are the shareholders getting more than they're giving up? Here's one way to find out. Using the midpoint of your NAV estimate of $5.50/share, TOL was worth about $5.50*31.3M = $172M before the dilution. They sold 28% of the company to the new investors, so the existing shareholders gave up $48M of value and received $25M in cash. Obviously that's a very bad deal unless the $25M can be used to generate new production that has a NPV greater than $48M. Is that the case here? Do you know enough about the economics of TOL's production to answer this question reliably?
Thanks,
aagold