boomer, here is why I believe a 2:1 ratio is way too low for any share exchange of RDMP stock for XBOR stock.
Let X = value of XBOR business (net of debt)
Let Y = value of RDMP business (net of debt), without including the value of its holdings of XBOR stock
Let Z = exchange ratio of RDMP stock for XBOR stock
The equation for the exhange would thus be:
Y + .8X X
------- times Z = ------
122 M shs. 16 M shs.
A reasonable basis for valuing any E&P company would be the pretax value of its reserves less any debt. This would give a value of about $32M for X and $20M for Y. This would mean the right-hand side of the equation is $2/share. Yet if you use 2 for the value of Z, that would make the left-hand side of the quation worth only $.75/share. The only way to balance the equations under these assumptions would be to make Z = 5.3, not 2.
Would appreciate anyone's thoughts on either the approach taken or the assumptions used above. If I can get confident that the above is a reasonable approach and the assumptions I have used are reasonable, I would like to explore initiating a class action lawsuit against RDMP together with its officers and directors if they propose any merger between XBOR and RDMP wherein the exchange ratio of RDMP stock for XBOR stock is anything less than 5. If anyone reading this would like to join me in this quest please email me at edajootian@aol.com. If anyone knows any good SEC attorney who would be willing to take on a class action lawsuit for a contingent fee please also email me, thanks.
