Investors tend to exhibit the typical short-term reaction to a dilutive offering, ignoring the positive macro effect the additional capital can have for a company. One very common question related to mergers and acquisition transactions, especially at the Pink Sheets and Bulletin Board level, is the question of dilution. In these markets, dilution is seen almost universally as bad. The reality is, however, that for companies in these markets to grow, they almost always need additional capital. This is why most of these companies are publicly traded in the first place.
The need for capital is important to understand, because if you have an interest in investing in a micro-cap company, you must take this potentially dilutive aspect into your consideration. Is it good dilution (limited, near term and returning greater value than it costs) or is it simply money raised for salaries and non-productive expenses. When choosing to become involved in a transaction, Javelin looks for companies that believe that dilution should only be used as a means to deploy assets that will represent greater value, either in the near, middle or long-term, for the client company and its shareholders. Whatever the case may be, it will be Javelin’s primary focus to assist client companies in managing the dilutive aspects while building shareholder value over time.
These are not my words they are taken from financial websites.
AI
