RE:Are we close to a Nuclear Tipped Dilution Event?
Wonderful post Tx. As always, thought provoking and solid. The kicker you omitted in your analysis is ES himself. ES will have well over 10 percent of the shares of Novo in May 2019 once he exercises his warrants. He will not make the same mistake with Novo as he did with Kirkland as discussed in his Jeckel Island speech. ES will want maximum value from his investment in Novo. I'm not nearly as good as you at analysis but here goes. First off, ES could project what would happen in the future if Novo SP skyrocketed. He had visited Purdys/Comet and backed QH in buying up the down dip. Yet he allowed Kirkland lake to come in for the 14 million shares plus warrants. ES could have financed the $56 million himself but that would have put him over the 20% limit. It would have cost ES approximately $600 million to take out Novo at $4 a share which was probably to much risk for him so he brought in Kirkland Lake in in a big way. IMO ES structured the Kirkland purchase to maximize his potential gains while protecting Novo from a possible early takeout as you have astutely have pointed out since I bought in last year. Second, I think ES is making adjustment to his calculation of maximum profit as indicated by his continued buying of Novo and his investment in Pacton. What this leads me to believe is that ES will delay or prevent the takeover of Novo by Kirkland Lake or any other major. I don't know the percentage ES owns of Kirkland Lake, but let's assume it's 15 percent. There is an ultimate value that ES puts on Novo. Lets assume its $50 discounted. Value to ES would be $1.25 billion. ES would never go for a takeout bid by someone other than Kirkland Lake that was less than his discounted assumed Novo value. If Kirkland Lake offered anything less than than ES's discounted price, then ES would have to calculate what price maximized his profit as he owns a significant piece of Kirkland Lake. My analysis is very basic as ES is in his 70s and is looking at inheritance tax, capital gains, and whatnot but I think ES will prevent a takeout of Novo for many years unless his price is met. Thanks again Tx, I remember communicating with HTG last year and asking her if she had anything interesting on the go. She told me about Novo and mentioned you as some fantastic guru who had predicted everything that was happening. She was so right.