De Grey capital raiseAs someone who’s been invested in De Grey for well over a year and was prepared for a long hold, I thought I might comment on the capital raise. For me in British Columbia, it stinks.
Here’s why:
Only an “accredited investor,” as defined (if in British Columbia), is elegible to subscribe for the pro-rata renounceable entitlement offer. Existing retail shareholders cannot participate if they do not pass their particular jurisdiction’s hurdle.
As long as De Grey trades above the raise price of .05 AUD, the entitlements will have some value, up until their expiry. For example, if De Grey continues to trade OTC at .05 USD, the entitlements might have a value of around .014 USD, and if it trades at .069 AUD in Oz the entitlements might have a value near .019 AUD.
The entitlements, once trading, can be quite valuable as long as the stock trades above .05 AUD. Percentage wise this alone is a pretty big hit to take for those passed by.
The discount between De Grey’s recent trading price (let’s call it .085 AUD so as not to count the spike immediately before the news came out) and the raise price of .05 AUD resulted in an drop to .069 AUD over the next two trading sessions. Let’s call that a .016 AUD drop.
So, in conclusion, inelegible retail shareholder’s in De Grey’s pending capital raise currently appear to be disadvantaged to the tune of .035 AUD (.019 AUD + .016 AUD). That’s a combined dilution on the order of 40% or so.
In my opinion this is also a texbook example of how rules intended to protect retail investors (the “accredited investor” hurdle, for example) can achieve the opposite effect.
If this raise had been done at a 7 cents AUD I probably wouldn’t have commented here.
I’ve sold half of my position. Good luck to all retail longs.
Please DYODD.
GF22