RE:How do you exlpain the SP drop ? I will offer MO on the decline in share price:
Firstly there is a float (shares not owned by true insiders and also net of the 109 million returned by M&P) of just under 200,000,000 shares. On the TSX there were about 2.7 million shares traded the last two days. That my friends is a very measly 1.3% of the available float and just 1% of the new basic issued count of 266 million. The stock is very thinly traded for having so many shares so if a person holds 500 thousand shares and decides to sell them in a panic, if will drive down the share price very very rapidly. That is what happened. The question is WHY did people decided to sell? Also remember that the total shares traded amounted to a total of ~ $340,000 of capital changing hands. This is not a panic buy the remaining institutions but very very small potatoes compared to the market cap of the company (~$30 million)
Well there are three likely reasons for that:
- The first is that they saw the news release by the TSX and read way too much into it. If anyone read the release the previous day by Tuscany they would have expected the TSX to make such a release. The release was NOT BAD NEWS but rather neutral to GOOD news as it was a confirmation that the TSX had approved Tuscany's application for a waiver of shareholder approval for the M&P transaction. GOOD NEWS. The TSX has no choice but to conduct a review of the process however as it is the law so they have to make the announcement (which TID indicated they would if they approved their application for the shareholder approval of the transaction)
- The second is the confusion of the asset sale and the way it muddled the Q3 performance. One would have to be a senior CA to work through the numbers and come up with whether it was a good deal. So some holders of the stock decided to sell as they may have seen the asset sales as a big negative. THE DEAL WAS A VERY GOOD ONE FOR TUSCANY....NOT SO GOOD FOR M&P. TUSCANY GOT $65.3 MILLION FOR THE AFRICAN BUSINESS AND AN ADDITIONAL $23 MILLION FOR THE INCLUSION OF TWO OPERATING COLUMBIAN RIGS FOR A TOTAL CONSIDERATION OF $88.3 MILLION. THE REAL PLUS IS THAT M&P ARE RELINQUISHING THEIR 109 MILLION SHARES AT A VERY VERY LOW VALUE WHICH ACCRETIVE FOR TUSCANY.
- Q3 results were lower than anticapated, Some may have sold on this
They also did some significant write offs of bad debt for Centurion($8.9 million) and CYA ($4 million) and the Gabon VAT will go along with the asset sale so if it is collected (~$12.5 million) M&P will get it. THE GOOD NEWS IS THAT ON NOVEMBER 7 THEY SETTLED THE COLLECTION WITH CYA FOR $12.5 MILLION ($16.5 ORIGINAL AMOUNT - $4 MILLION WRITE OFF). THEY WILL RECEIVE THIS 12 MILLION (NET OF EXPENSES) OVER THE NEXT 10 MONTHS AND IT WILL BE COMMITTED AND ALLOCATED TO DEBT REPAYMENT. SO THE LONG TERM DEBT IS REDUCED FROM $208 TO $158 AND NOW TO $146.....A $62 MILLION REDUCTION AND LIKELY MORE REDUCTION TO COME.
So with the with the uncertainty of the situation (until the call on Monday) there will be very little demand for the shares (particularly from institutions who can reall move the share price up) and as I mentioned on person with 500 share shares that just dumps at market or feeds the bid can make a mess of the share price BECAUSE OF THE VERY THIN TRADING REGARDLESS OF THE SIZE OF THE FLOAT.
Trust this helps