As I am sure many of you are wondering, I am wondering what has happened to our EDV, share price wise. It does not seem to make sense. One of the things that doesn't make sense is: EDV is down 22% in the past 30 days, not counting today. GDX, which is an indication of other gold miners price movements, is down 12.4% in the same time frame. And there is no reason for that. In fact there are lots of reasons for the opposite result. The average price target given by a bunch of analysts, ones not paid by EDV to give their analysis , is $43C. EDV is doing significant share buybacks. And current management is continuing in the tradition of previous management in doing an impeccable job. And they have made no serious blunders, or any blunders it seems. There has been no bad news, and production and cost estimates are being met.
Now it is traditional that when this happens , to claim that there is share price manipulation. I mean that's pretty obvious right? So let me make a case for the why of that manipulation. I have no idea if it is an accurate assessment of the situation, and it isn't something I suspect is happening , not being much for conspiracy stuff; but it would explain things.
So my little theory here is that Barrick is going to take a run at EDV.
Barrick recently tried to take over Freeport but failed, so they want to buy something; you know the feeling - retail therapy it's called. If Barrick had EDV it would be pretty much tied with Newmont for number one - gold production wise, and I think that might be important to Barrick. I think it probably irks Barrick that "Newmont is the leading gold company...." And Barrick is pretty big in Africa and the synergy with EDV would be great. Barrick Africa would be formidable with this combo, especially if they let EDV managers do the management.
Now a problem would be that from all past indications, La Mancha would have no interest in this. So it would need to be hostile. My view of Barrick is that they are a bunch of scumbags, so I think hostile would work for them. The last time a company that I had some shares in had a hostile takeover attempt, I remember that the merger or buy out needed 66 2/3% approval by those voting, and 50% of total shares. From the EDV Corp. Presentation, La Mancha owns 19.4%, so not enough to block on their own. The top ten owners, own 61.9%. They use to say that retail was a mere 5%, if that's still true that leaves 33% unaccounted for, and none holding more than 1.3% which is what number 10 holds.
So a scenario could be that Barrick has been selling it's shares , they hold or held 3.6%, or they made a deal with one of the funds to sell their shares. These funds of course would do anything for a buck. And much of it no doubt is untraceable. I don't know how many shares would have needed to be sold in the past month , perhaps not that many, to drive the price down this much. And then Barrick waltzes in with a nice offer, to save all the shareholders,of forty bucks a share C. A mere ten billion C. And maybe they figure that first driving down the share price was necessary to convince enough to go for it. The funds would be happy to get a big boost for a holding that , really ,has languished for a long time, but not knowing the 33% unaccounted for, it is hard to say what their interest is. And for me, and my 300 shares, forty bucks C would be tempting.
La Mancha might fight this, and maybe we would get a proxy war going, which would be fun, and a competitive offer? But if there are a number of people like me, for whom $40 looks good, when the share price is a mere $26 and change, then manipulating the price down this low would make total sense to Brrick. If the share price were where it should be, at least $35, then an offer of $50 might be needed. That would be an additional cost of $2.5 billion. So instead they sell off maybe 500,000 shares a day for a month at a net cost of maybe a hundred million C.
Anyway, that's my theory of the day. And yes I have too much time on my hands. I am stuck in Canada, it's winter, not much to do. But the beach beckons, maybe soon.