About Private Placements ("PP")
Per current discussions re: Ironman PP, here are some things to keep in mind about how PP's work and what to expect from this last one by Ironman Energy.
Basic Facts:
1. Private Placements are pretty much guaranteed to have restrictive legends of one year, 6 months minimum.
2. DPDW will have to register those shares for resale with a filing like an SB2. People see a SB2 and often mistaken it for new dilution. It is not. It actually is registering shares from a prior PP for sale by the buyer, hence resale.
3. If after one year DPDW has not registered those shares for sale Ironman will be free to sell them via a Rule 144 filing.
Basic Assumptions:
1. Ironman was either buying up to the PP or had only recently discovered or decided to own DPDW as it was rising. Either way, they wanted size. Offering to buy them direct was very wise on their part as they could not have accumulated 3M shares at the same cost basis.
2. Ironman may keep buying on the open market. Whether DPDW was only willing to sell X amount to Ironman at 0.96, it is still very, very common that funds will support their own PP purchases by pushing the stock higher on the open market.
This is how floats get dried up. Thus, when you see a fund get PP shares in an interim financing like this you will usually find they are buying more. We will know in the future if they end up with a high enough percentage of the OS to require Form 4 filings. If not, we will not necessarily know how much Ironman owns between 3-7M shares.
3. Company is being strategic in taking in some cash without diluting too much, hence "interim" financing as they are step laddering to bigger things. Share prices climbing are strategically planned whenever possible as long as there is fundamental strength in the news and contract pipeline to support such management expectations. Therefore it is likely correct that:
(a) Company is fairly savvy about the markets in general. These executives do come from other successful public companies after all.
(b) They understand the leverage in building share price to coincide with a chain reaction of timed events laid out in their internal business plan.
(c) Acquisitions will be completed at lesser dilution as share price is higher. Since a deal like Mako can be completed based on something like the preceding 10 day average share price, it is no surprise if it closes later than sooner. It is a win-win for company and shareholders to do so with lower dilution.
(d) Management is share structure conscious. This should bode well for their expansion strategy (see above, i.e. dilution) and because it telegraphs to shareholders and the markets the executives are gunning for their own personal gain via higher share prices via responsible share management while growing the company. This is key for anyone going long.
4. Funds are not necessarily institutional in the classic sense. Ironman or any "fund" does not even have to manage other peoples' money to be called a fund. It could be one man's money investing via a fund structure. Nevertheless, this or any other fund of any stripe represents smart money of sorts. Again, PPs by funds are often augmented by open market share buying to support their investment in the restricted stock.
5. Funds buy hundreds of thousands and millions of shares. They have different styles of buying and selling just as we all do. What you are seeing recently is aggression that shows the confidence of due diligence compounded by additional confidence in the preceding chart support of the last year.
6. Any fund can flip out for $1-3 gain after they load up and drive it higher as the float tightens, shorts cover and MMs get out of the way. But if they do a PP, they usually keep buying to support their own investment. Though they may flip trading shares until their long position matures and has long term cap gains, generally speaking you can assume a PP participant like Ironman was a bullish indicator and therefore we have plenty of support for the stock many multiples above their PP cost basis.
