By: Varok
07 Mar 2005, 11:15 AM EST
Msg. 23121 of 23122
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I posted this scenario last year around Thanksgiving,now the climate may have changed,but this is just my opinion.
The halt may have changed the climate,but here goes.
Please, just take this as just one more possibility to the many that have already been reasoned with.And we heard them all.
Why I think a R/S isn't so bad for CMKX and why it will happen.
I realize many will dread this synopsis,but really shouldn't be so concerned..Yes a R/S in general with most companies is the "last nail on the existing coffin" but there are positives to this application..
One must understand that a R/S isn't always negative and with respect to CMKX is a must to actually gain in shareholders equity..
Much has been spoken about how many shares there are outstanding and most of you know that market cap is a direct equation to the O/S and the worth of a company..
In order for us shareholders to realize the potential of a rising share price and our investment, is to understand the current climate that the huge O/S can and will be a negative in the long-term appreciation on shareholders equity and how our investment can become a true investment and not just a dead pool of wasted venture.
We know that the company has 800 billion Authorized shares and by any standard is probably the highest of any company in the history of American capitalism,not to mention the touted figures of the same amount in O/S..I know and most rational intelligent investors and traders that have played in this venue for years, realize this is totally out of the norm and will in time be reeled in or cut back..
Now here is how I see this played out in the coming new year.
First: We have all heard that there is a possibility of going to a higher exchange and this will be good,but the share structure must be brought within reason so as to qualify for the appropriate and the fundamentals that qualify such a move..
If CMKX has desires to move onto any higher exchange,they can pretty much qualify with the present share structure and current shareholders..The O/S will be a problem that I will address,but the share price needs to be $3 upon initial acceptance and held for 30 days on the AMEX..It is there then that the company can trade around a $1 and above...
Ok,so if the company and for this example we will use the share structure of 100 billion shares outstanding..To qualify for a higher exchange and it really doesn't matter which exchange, since moving higher only requires that a company files.. Once a company files,it is upon this venue that a company gets structured by the fundamentals,thus accordingly, market cap and the eventual share price..
Upon the filings, the company will have to find it's net worth or just plain worth to qualify for a minimum price of $1 a share on Nasdaq or $3 a share for AMEX,on 100 billion shares outstanding, would give the market cap of on $1a share a $100 billion and on Amex $3 a share, $300 billion market cap.Now, will the company have total assets on the claims and other tangibles worth this much and here is where it gets interesting and you must realize the future growth..
If left with the same share structure there will be not much for shareholders growth because market forces will never realize a share price higher than the market cap of 300 billion dollars and the price will always languish in this doldrum area..I realize for share holders that are holders since .0001 and up to .0011 is a bargain,but for the company in need of capital expenditures for improvement will never accept such a scenario or will even the institutions that demand liquidity allow this..So what is a company to do?
If the overall worth of the diamond claim is 300 billion dollars,then this will be computed over a life period of a diamond mine and depending on whether it's strip,which is about 15 years once implemented, or underground, which is longer and this is probably due to setup and such..Never the less, the worth will be computed on actual dollars assayers yearly production brought up...
Remember,the company has 100 billion shares outstanding and the share price has been already factoring in the yearly production,but not much for the growth aspect..So the company will languish in the $1 range for certainty and the growth cannot be achieved because the number of shares outstanding already capped it to the max or actual brought up on the assayers yearly production..The overall worth of the claim is important,but the yearly production is what establishes the share price..What goes against shareholders in the long run is when they leverage out the years of the claims for financing..Once again we are hampered by the share structure that prevents shareholders growth and the ongoing financing that it takes to extract the diamonds 10 years ahead and trust me, this will come about well enough as the claims and worth are legitimized..
If the company, before it moves to the higher exchanges and reduces the O/S, the yearly production will ultimately continue to enhance the share price thus gaining shareholders equity..
So, I believe that the company will probably do a R/S once they have established a decent level and my guess would be around .01 to .10..If this were to happen,most will bail and the R/S will in effect be a 200 to 500 to 1 on .01 = $1 to $5 a post share price and accordingly the appropriate share structure with .10,thus reducing the O/S of 100 billion to 400 million share outstanding in the post split.This is based on a half way split of the 2 extremes between 200/500.
The only other option is for UC to buy back most of all the existing O/S to prevent such action...
My guess that it will be a R/S,but in the post split it will be a much stronger diamond company any of us imagined..
This is one time that I feel a R/S will ultimately benefit shareholders and I still consider this the "greatest penny play of all time" If the share price and no R/S, this price will languish in this area without shareholders growth..
Just my opinion and have a Happy Thanksgiving..
Have a good day
Varok
