"Increasing cap ex from 200% of market cap by 15% is not worth 30% more shares forever."
Treit--Listen, I'm finding this very painful as well. If this blows up, the consequences for me are, well, consequential. I can not predict the future, but unless Solomon has become a mad man, I have confidence in him.
But you wanted a mathematical response. The returns SIAF is getting on marginal (non-land) cap-ex are outrageous; they may be 80% this year, maybe even higher. So yes, in the first year their will be dilution. But I suspect in the second year there won't be. If that's wrong, in the third year there certainly won't be. In 10 yrs (assuming the same rate of return), that dilution will look like an act of brilliance. Take the $15-18 mil that they are generating thru dilution this year and compound it by 80% over 10 yrs. Eps is staggeringly higher with 30% dilution in year 10 than it would have been without it. Yes, there is more risk with this approach, but there is also more return. High rates of return cure a lot of sins. Solomon is taking a long term perspective and so am I, however painful it may be at the moment.
Also, in addition to the points made Stolpin (all good), I keep coming back in my own mind to the fact that since China is investing in EVERYTHING (high speed rail, iron mines in Africa, heavy oil in Canada, untold new atomic reactors, etc., etc.), I doubt high quality food is an exception. I'm sure there are hundreds of millions, even tens of billions of dollars, either currently being invested in this area or actively seeking a home within it. I think Solomon knows that and that's one reason he is pre-disposed to expedite all functions to secure SIAF's position.
So I can relatively easily see the argument for dilution. If it doesn't stop as promised, I will consider it an act of bad faith. But Solomon has been honest with us so far; his estimations haven't always been right, but he has been honest. And I truly think he is not some meglomaniac expanding his empire at any cost but really is trying to secure the best possible future for all investors. Further we may be very close to achieving that, so I'm certainly willing to give him the benefit of the doubt now.
