RE:Theory Re. Eric Sprott Purchase
AlwaysLong683 wrote:
Some may be wondering why Sprott purchased the 15M shares from Novo at 8.35 and 8.45 instead of just steadily buying more shares on the open market at current NFG share prices (mid to high 7's - closed at 7.68 yesterday).
Unless there are restrictions on him buying shares in the open market given the % of outstanding shares he already owns, I suspect he realized that if he tried to buy the 15M shares on the open market within a reasonable period of time, he'd likely have to pay higher and higher ask prices and thus drive the share price higher and higher as he tried to accumulate these millions of shares.
The 30-day average trading volume on NFG is currently around 145,000 shares. 15M shares would equate to approximately 103 days worth of trade volume at current levels, so in the end, he likely would have bid the share price up far higher than the 8.35 - 8.45 he paid for Novo's shares. Again, just a theory, but it would seem logical from Sprott's point of view.
Yes, but the opposite is equally true for Novo. Novo had every reason to sell at a 10% discount because selling 15M shares in the open market would tank the share price, resulting in a substantially lower total liquidation revenue. Given their mutually compatible incentives, Sprott and Novo could have agreed on a price more in keeping with the market valuation, for example, an average daily closing price over a specific trading period. But they didn't do that. Instead, Sprott paid the premium. So, perhaps, he wanted the shares a bit more than Novo wanted the cash.