Alterra Power MGMXD

The 2 types of consolidations

[materialsgirl]

Number one;

This is the most common.  Often a small company, sometimes an early stage wanna-be miner, needs money to stay alive.  If raising money results in a massive number of shares (say one or two billion shares that trade at 1 or 2 cents) it makes sense to do a 1 for 10 consolidation.

Typically, this kind of company is on its death bed and just saving money on funeral expenses.  Still, they dream of $5 copper or $3,000 gold and there may be a one in 200 chance of surviving.

Investors understand this point and the result can be a 50% drop in the price after consolidation

Number two.

AXY is a classic example.  The share price is trading below $2 and the scale of the operation is migrating from being an early start-up to a serious intermediate type company.  The company consolidates in order to generate a higher trading share price so that all investors and all funds can consider investing in it.

There is no logical reason for the consolidation to lead to a discounted price.  None.
but occasionally, in the short term, as penny traders bail out the share price can drop a little.

If AXY can execute in a middling way over the next 9 months then the share price will exceed $10 or $1 before consolidation.  I am not predicting that they will execute  in a "middling way".  They have never done so yet.  What I am saying is that a dollar share price is a sure thing IF the company does execute is a half middling way.

A consolidation is a positive thing for AXY but it will not counteract really bad execution.  If net losses come in at $10 or $20 million a quarter going forward then financial engineering of the shares will not and cannot compensate.    Hopefully, this dynamic will never be proven for AXY shareholders.

Happy long weekend

Mat