Initial Reaction (Part 2)
Many thanks to all of those posters who have shed light on the number of possibilities going forward. To those of you offering negative opinions, with supporting arguments, thank you. For those of you bashing, whining or venting, try to re-focus. Your current approach is unhealthy.
I need to get my thoughts down on paper, so to speak, as a way of organizing my own viewpoint on this transaction. Initially, I was opposed to the merger, given the information at the time. One piece of information that I was not aware of was the October closing date. I either missed it, or failed to realize its significance.
For now, I am focusing on two areas which I will call “The Squeeze Play” and ”Deal or No Deal”. The mechanics of the deal are straightforward to me: 1 x 1.26/2=.63 shares in DNN. Whether or not I believe that to be fair will be judged after the PEA comes out in August/September relative to market conditions at the time.
The Squeeze Play
We are now going to find out if there are any interested parties in owning Triple R as a stand alone. Dev has definitely orchestrated this deal to force the issue. I have to give him kudos for that move alone. If you want Triple R in isolation, you have to act before the October deadline.
Not to act means you will be left with one of two choices after the vote. (assuming you have the means and will to put forth an offer) You will either have to buy all of DNN which is far more expensive than FCU alone. However, you could also gamble that the deal will not be consummated and FCU might be more vulnerable to a low ball offer. If this scenario played out, you could be a big winner. On the other, hand if FCU shareholders vote down the proposal I suspect we would have a lot of positives happening at that time.
In any case, Dev’s strategy has forced the issue for better or worse. I believe that most of us who bought in for the buy-out would approve of this tactic. At least the issue of selling Triple R will be brought to a head. We will know in short order if there is interest or not. My money is on the side of a bid. I cannot believe that one of the biggest (and growing) discoveries in 40 years is going to be let go without a fight. If no interested buyer arrives, we move on to “Deal or No Deal”.
Deal or No Deal
Not sure if not voting counts as a supporting vote, or if not voting just reduces the number of outstanding shares from which the % share count applies. If anyone can provide a definitive answer, that would be appreciated. If it does come down to a vote, how the % is determined will be important.
A deal to me represents a different investment approach. I bought in to ESO in July 2011 and believed that the endgame was currently in sight. A deal means that I am now in to this stock for probably a few more years. In addition, my approach to selling will need to be adjusted. At the moment for some entity to buy all of the new DNN seems a bit of a stretch, although some seem to believe that is an endgame in itself.
For me to accept a deal in October I believe the following would have to occur:
i) I feared a real low ball offer would succeed. Therefore, the combined companies would offer better value;
ii) On the positive end, I believed world conditions were improving for the uranium market. Therefore, in a few years our market cap would rise from 900 million to 3 or 4 billion.
I could vote for a deal if either negative or positive scenario seemed real to me at the time.
A No Deal vote would likely imply that I view FCU as being undervalued to DML at the time. Scenarios causing this to play out would be a revised RE north of 150 million pounds and a homerun PEA. Conversely, the DML assets would only be hitting singles this summer. Admittedly, I am not up to speed on DML assets. I suspect the value of DML assets will be discussed on the BB during the course of the summer.
So, where do I stand at the present moment? The facetious answer would be somewhere between here and there. In part, that would be true. I have not made up my mind because a lot will happen up to and including the month of October. At least, for me anyways, this exercise has brought some clarity to the parameters I will be looking at should we need to vote in October. Having said that, I believe the Squeeze Play will be at work and we will be voting on something other than the DNN merger arrangement.
Looking forward to the months ahead. In the end, we will be voting one way or the other. Normally, I do not vote on these types of initiatives. However, in this case I will most definitely be voting as the stakes will be high one way or the other. As usual, time tells all.