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You understand what is happening completely.
The problem with your plan is Offor's participation will not be known until after the closing date. If you haven't subscribed to your rights, or only partially so, and then you see that Offor went all-in, you are limited or out of luck in round 2. I believe the share allocation in round 2 will be pro-rated based on your participation commitment in the first round.
If you wait, and he goes all-in, you lose. If you go all-in and he sits out, you lose. But if you go all-in and Offor goes all-in then you know you made the right bet.
Exactly! If Chrome see's value at 7.5 cents and plans to participate, they surely want to get as many shares as they can for that "value" price. Announcing that they are fully participating would increase retail investor confidence and participation, reducing the number of share available for the second round.
Chrome is doing as it should and keeping quiet. ERHC is doing what all public companies do and taking their largest shareholders "guidance" and remaining quiet as well.
Legal or gray, right or wrong, that looks like what is happening. Given the negative nellies and the sentiment of this board, I think Offor will own a far greater percentage of this company once this plays out.
The only way to prevent that is for everyone to participate and that just isn't realistic.
I want to wish everyone a Merry Christmas and happy holiday season. I hope each of you find health, happiness, and prosperity in the new year!
I know it's obvious, but well said Krom.
In more simpler terms... think of your shares of ERHC as pieces of a pizza.
When you bought it, the pizza was cut into 8 slices and you bought 2 of them.
After you bought it, the owner cut the pizza into 16 slices, but you still only own 2 of them, and he lowered the price per slice to half of what you paid.
That's dilution.
If you particpate in the offering, you can still eat all of the pizza that you thought you bought, but it will cost a little more. If you don't participate, you might feel hungry if the pizza is really good.
The Mayan calendar suggested the end of the world a few days ago. We're still here. In this business setting our heart on dates usually meets with disappointment.
Badog, I agree with that completely. Let me add that I am happy to see you still here. This one breaks the rules enough to draw your value oriented approach.
I wish you a merry christmas and happy new year.
Excelleent analysis 2IRAs. Thanks for taking the time to do it.
Can't sell whatcha ain't got.
A concern here or there, on one thing or another, is fair... lord knows over the years I've had mine and voiced them.
But expressing concerns over every past decision, all current plans, and any future direction? If that isn't a sell signal to anyone feeling that way...
The discussion was about not participating in the offering and just buying on the open market if the share price is lower than 7.5 cents. That buying pressure would force the share price higher. Likewise, if the share price is higher than 7.5 cents, people will sell existing shares to buying the cheaper offering shares.
Like it or not, absent a news development, this stock is locked at 7.5 cents until at least January 31st. If ever there was a time to do some tax loss selling, this is it. We virtually have a guarantee that we can buy back our shares with very little risk of the stock running away from us while we wait 31 days to avoid the wash sale rule. I suppose that could push the stock lower, but savy investors will be scooping up those sub-offering price shares, so it won't go much lower, IMO. Each investor has to decide... are the few additional shares that could be gained buying on the open market (if we fall below 7.5 cents) worth depriving the company of the funding it needs to explore Kenya/Chad? Basically, will short term greed cause shareholders to hurt themselves longer term? I intend to participate as fully as I can. If they extend the date I think I can come up with the money, however I have heard there might be issues participating with shares in IRA accounts. I can't understand why, unless it is a contribution limit thing.
The only risk to locking in a tax loss now is a news develpment. But then there would be that much more selling of existing shares to buy the cheaper offering. I can't see any scenario where we can't know, with confidence, that the share price will be 7.5 cents as the closing date approaches.
If even a small fraction of investors try to buy the eqivalent shares to those they are offered, the share price will rise much higher than the offering price very quickly.
I can't answer that. I haven't ever been through one of these. I expect there will be more details and we will be guided towards our brokers for answers.
I hope we get more than "ask your broker". They have to know that most OTC investors won't, and that suggests they are catering to Offor to take control by insuring that he gets the bulk of the over subscription because many OTC'ers don't know what to do.
For example, if Offor fully subscribes for his 100M, and all remaining shareholders only subscribe to a total of 46M, the company is short of selling 100M shares. Those shares will be offered to everyone that fully subscribed, on a pro-rated basis based on their % ownership of the company.
The playing field is about as level as it can get, *if* you fully subscribe.
Everyone that fully subscribes will get the option to oversubscribe for the untaken shares. Everyone will have the exact same option Offer does, but you have to fully subscribe to the initial offer to get and untaken shares.
If the company doesn't get the money it needs Offor's shares will be worth no more than ours. If he sits out this placement and then scoops up shares for a song, the SEC would be all over it. When you own as big of a chunk of a company as Offor does, manipulating the share price in your favor would draw a lot of attention.
That's still in the back of my head... they have roughly 13 months to attain and hold 75 cents for 30 days for those options to vest.
I don't believe that is correct. They intend on offering any unsubscribed shares as an over-subscription to those (Offor) wishing to participate.
Nobody believes every shareholder will participate, not even close. I wouldn't be surprised if they calulated all of this out predicated on Offor being the only participant. They *will* get their money, and the threat of a follow-on private placement doesn't exist at this time.
The more people that participate, the less Offor gets. At a minimum he will get 100M shares. If nobody participates he will buy an oversubscription of all 246M shares.
If everyone participates fully, Offor's ownership percentage remains 43%. If nobody participates, Offor picks up all 246M shares, giving him 550M shares of a company with 985M shares outstanding... or 55.8%.
If the thought of Offor gaining over 50% control doesn't sit well with anyone, we have to participate to the highest degree that we can.
Rights offering thoughts...
This rights offering will be distributed as a dividend on December 27th, 2012. Since I own shares in 3 different accounts, I will be recieving rights in a traditional IRA, a Roth IRA, and a taxable brokerage account.
I don't know about the tax implication of this offering, whether it has any taxable value etc. But I do know that it means I have to figure out how to proportionately fund the taxable, Roth, and traditional IRA. I don't *think* that IRA contribution limits will prevent me funding each account enough to participate fully in each. My issue is going to be finding the money. Even if there is a contribution limit issue, I can get around it by contributing by year end and again after the first of the year.
Now I just need to squat down and push real hard... hopefully I can produce the funds. LOL!
I believe the plan is offer an oversubscription to all fully participating, meaning the full 246M shares will because taken at 7.5 cents. They will raise the capital they expect. That's a done deal, IMO.
There will be shareholders that don't participate at all; there will be some that fully participate, but don't plan on an oversubscription; and there will be those with the cash on hand that intend to fully participate and oversubscribe. Any shares not taken up in the initial offering will be alloted to that last group, pro rated based on their current ownership percentage.
I want to fully participate, but that January 2013 closing date will make it difficult to come up with the funds. Still looking for a solution though.
Just guessing, but they gave very specific costs for the magnetic and seep studies. That indicates to me that they have hard quotes from companies ready to do the work. As soon as the offering opens and participation begins (I am assuming Offor will subscribe immediately) they can sign the contracts and begin work. They gave a timeline of 2 years for these studies, but I believe that is worse case scenario. I am thinking they will complete the studies in the next 12-18 months. If there are promising prospects identified this stock will not be trading at this level. At that point they can issue another offering at much higher prices (and much fewer shares) to raise the money to shoot seismics over the identified prospects. Juicy seismics and our fund raising and dilution concerns will be over, as there will be multiple partners stumbling over themselves to partner with ERHC.
I think a *LOT* is going to happen in the next year or 2. When the market starts to realize that could start at any time. Throw in a surprise phase 2 announcement in the JDZ, or partner(s) in an STP-EEZ PSC, and the fun begins all over again... after a very long period of "not fun".
That's a very good observation. The JDZ became a hotbed for exploration because there simply weren't any onshore or shallow (inexpensive) areas left to explore. Kenya, and to a smaller extent, Chad chang all of that. Chad has discoveries all along ERHC's south eastern block, raising the odds of additional discoveries, and recent developments in Kenya position it as a very rare opportunity. The potential exists for very large onshore discoveries. This could be huge.
Agreed. The valid points that I see are these...raise funds and explore Kenya and Chad, or close the doors and shut the lights off.
Pick one.
It brought you back into the fold.
Wake up. Read. UNDERSTAND! The rights shares can be sold at any time. There is no restriction. What is not transferable is the right to buy at 7.5 cents. You have been corrected on this multiple times. Please quit implying that anyone subscribing to the rights offering is somehow locked into holding those shares.
Why don't you put up the receipts showing the fly first class?
Probably #3. Most OTC shareholders have never seen a deal like this. A "deer in the headlights" effect is likely.
I like that. It shows that ERHC Energy is different than most OTC companies.
Whoa! That's a WHOLE LOT BETTER!
Dang it! That's going to make this difficult for me to fully subscribe. If I think, I can. If I can, I will.
Why does everything always have to be so darn difficult?
LOL!
We know emdyal! You prefer that they produce a partner that doesn't exist or close the doors and leave all of us with nothing.
We *get* what you want. We just can't comprehend it.
"management richly paid themselves to invest in a fraud"
Very shaky ground, IMO.
So they paid Chad the $5M they owed. I suppose you think they should have defaulted and relinquished the blocks?
Whoa!
I disagree. They said that you can buy 1 share for every 3 you own. That tells me the size of this offering. There are 750M shares floated now, so If I can buy 1 for every 3, they will be offering 250M shares in this tranche.
If you participate you face zero dilution.
What is your solution to the problem that YOU have? Should they NOT raise capital, and forfeit these blocks? You act as if your preference is that they close the doors and turn out the lights. I don't like that plan.
Oh, wait, your preference is to sign a partner that will carry them, in an environment where no such partner exists. So I ask again, WHAT is your solution to the actual position this company is in? There is no "carrying partner magic wand" in the world. ERHC wants one, they have said repeatedly that is their preference, but not if they have to give away the ranch to get one.
So WHAT is your solution to the actual position this company is in? Your preference seems to be a wish, a wish that cannot be granted. There is only one viable solution... and that is to raise capital and do the studies that increase the value of the blocks... and YOUR shares, so that they can attract a carrying partner, which is what you want and will increase the value of YOUR shares.
Everything you want and demand would result in less shareholder value, not more.
There is ZERO dilution for any shareholder that participates. Your dilution comment is inaccurate and the "Ooofda" is unnecessary drama.