Issuing shares to keep the ship afloat is not an option. We saw that last year. That is why they sold one of the Sao Tomean blocks, IMO.
When I look at the numbers, this is what I see:
In July 2014 they started issuing convertible debt.
- the shares outstanding were roughly 750M
- the price was 10 cents
- the value of the company was $75M
Fast forward a year to June 2015
- the shares outstanding were just shy of 3B
- the share price was as low as 0.0003
- the value of the company was $900,000
The raised less than $2M for the effort.
So where are we now?
- post split shares will be just shy of 30M
- if the price stays at this level post split it will be 10 cents
- the market cap will be $3M
When I consider these points, I conclude that the dilution path is a non-starter. Convertible debt destroyed 99% of the value of the company and raised 2.6% of the market cap when the dilution started.
A repeat performance would raise $78,000 and leave the market cap at $33,000. I don't see that as a viable option. Then I consider that the CEO and CFO have been buying 10's of millions of shares for a reason. I think that reason is dilution is NOT the future path.
IMO, there will be ONE more dilutive event, and that will be to accommodate the "strategic investor" they have mentioned repeatedly. If that investor wants control we are looking at another 30M shares out, but for how much of an investment? Everyone has to decide that for themselves. IMO, the market cap is significantly depressed by fear of continued dilution. Absent dilution, where should the market cap be? If was $75M before the dilution started and with drilling nowhere in sight. We are 3-4 months from drilling and Ntephe has hinted that it could begin earlier because everything is going so well. Is $100M as they spud unreasonable? I don't think so, not with a significant cash infusion. Now back to the "strategic investor". What do you offer for a 51% stake in a company that could be worth $100M dollars in the near future with a chance for huge upside from there?
Everyone needs to figure that out with their own assumptions in the formula. I just know I look forward to finding out!
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