TimMcCracken wrote: SquishyInc wrote: Hey, Timmo Von McCrackonov,
You've given us noobs some good schooling on the nitty gritty of dilution, i'm just curious what you think about a somewhat newly formed company starting with a relatively large number of shares out in the very beginning. I was checking out HIP.v (Newstrike) out of sheer curiousity, and they have over 300 million shares out already and they're just getting started. Would you consider dilution to be more of a relative thing, where initial shares out doesn't matter as much as how much it's diluted from that point forward? Or would you consider that float to be a considerable hindrance to that company moving forward? I'm just thinking, a company with it's SP in the neighbourhood of 40 cents is going to have to dilute that much more than it already has to raise any sort of meaningful capital. Seems like a recipe for disaster, to me. Anyhoo, would appreciate yer thoughts or anybody who has anything meaningful to say to that.
TimMcCracken wrote: Grnhousegarbage wrote:
Vic is a horrible leader. He should be more focused on the quality of his product then subliminal insults at his competitors. Low cog's low cog's low cog's.... low quality. Higher quality bud can demand a higher price and potentially deliver higher margins. He him self said he can not grow the same quality as indoor.... does that mean there is no place for greenhouse? Not there is but don't get all butt hurt because investors value multiple growing platforms. F Vic he's a cry baby. I'd like aph much better if he was replaced with someone focused more on aph instead of it's competitors
Vic has still not formally announced or addressed the options he issued himself and staff the day before they released earnings.
He is stealing from longs future pockets without being transparent about it.
Dilution hurts longs and it is the company's duty to be transparent about it not matter how big or little it may be.
To touch on my example yesterday over the past 30 months CGC has diluted their stock by 250% to fuel growth prospects.
Their market cap has increased by 1199% over these 30 months, however the share price has only increased by 339%, due to the dilution.
This is a net difference of 860% ... to date we can say that for every 1% of dilution has cost longs 3.44% return based on today's price, and this will only compound as the price grinds higher in the future.
You guys may think I am nuts going on about small amounts of dilution all the time but see how it compounds and decreases long term value.
I am sure the battle tested longs that hung in here are happy about 339% over 30 months ... not many investment options out there would yield this kind of return over such a small time frame.
Over this period of time CGC's management has always disclosed any newly added shares via bought deals, acquisitions or issued options by way of public news release ... me as an investor had the information and could make my investment decisions based on it.
So Vic's options that he didn't disclose and the greasy timing is a big problem for me, as it makes me wonder what else he has not disclosed to the public, or what may he do in the future. This is poor management, a leader should be open and transparent.
Call it what you want but I'm glad Bruce released the article he did today. His job is to drive value and protect the long interest of CGC. He is being transparent and as we've come to learn some other managers can't say the same.
Regards,
Tim
Hi Squish,
Thanks for the Russian name for Tim McCracken.
I will take it as a compliment as one of my favourite hockey players growing up was of course the Russian Rocket Pavel Bure ... However, overall who could resist the great leadership qualities of Steve Yzerman.
You are correct in thinking that it is all relevant.
The only time dilution matters or should be considered is if you already own shares. My original stake in Canopy has been diluted by 250%. However, if someone were to buy shares Monday they are agreeing to buy a certain percentage of the company at it's current valuation and it will only be watered down going forward by any future cash raises.
So regardless of the amount of outstanding shares the only thing you need to consider when buying is the company's current valuation. Then you can make calculated valuation projections based on future revenues and future earnings and therefore projecting a future share price that you think future investors are willing to pay for. The goal is to find under valued stocks based on what future valuations could be.
As for raising cash the company's that have the highest valuations have the advantage, lower valued companies will not be able to keep pace without diluting their share structure by a higher percentage.
Here's an example based on two company's that are valued the same ...let's say $1 Billion ... and both want to raise $50,000,000 and let's assume they can raise at current market price.
company X
current share price : $10
outstanding shares : 100,000,000
market cap : $1 billion
shares issued to raise $50 million = 5,000,000
dilution added to current structure = 5%
Company Y
current share price : $1
outstanding shares : 1,000,000,000
market cap : $1 billion
shares issued to raise $50 million : 50,000,000
dilution added to current structure : 5%
as you can see the net affect is the same as it results in a 5% dilution even though company Y issued 45,000,000 more shares than company Y.
Now assume Company X is worth $1 billion and company Y is worth $750 million and they both want to raise $50,000,000.
Company X
current share price : $10
outstandkng shares : 100,000,000
market cap : $1 billion
shares added to raise $50 million : 5,000,000
dilution added to current structure : 5%
Company Y
current share price : $0.75
outstanding shares : 1,000,000,000
market cap : $750 million
shares issued to raise $50 million : 66,666,666
dilution added to current structure : 6.66%
basically outstanding shares mean nothing other than what's added after you're invested.
Companies with higher valuations hold advantage over others when raising cash, however that could be relative to as bigger companies have bigger expensive and require more capital to fuel more growth. But it can also help them get further ahead of the herd.
Anyways I have no idea what the ticker is you asked me about but don't let the outstanding shares scare you away from investing if you believe future valuation will grow at a percentage greater than any percentage of dilution that may be required to grow the business.
Hope this helps.
Timmo Von McCrackonov