Replies to post #301104 on ERHC Energy Inc (ERHE)

[ssc]

Let's look under the hood of the "dilution insurance".

So in the example if someone takes the advice to buy 5 million more shares and brings their average cost down to .004, they will have a total investment of $22,000. When 3 billion shares are reached, let's say a 1 for 500 reverse split takes place. The new share structure would be 6 million shares outstanding and the share price would be about 10 cents (.0002 x 500). The shareholder would have 10,100 shares (5,050,000 / 500) for a total value of $1,010 (from a total investment of $22,000).

But that's just the beginning. ERHC still needs to raise capital to survive at least another 2 or 3 quarters plus meet work program requirements. So they continue the toxic debt cycle. The first tranche would see toxic shares issued at 60% of the 10 cent price or 6 cents. To raise $250,000 4.1 million new shares would be printed almost doubling the post reverse split shares outstanding with just this first round, and that original $22,000 investment would then be worth $606. Everyone has seen how fast the share price dropped from 6 cents .006 and then .0006; by then that original $22,000 would be worth $6. That might be the level when Offor converts his cd's for about 400 million shares for each $250,000 toxic note. I guess people better plan on buying a lot more dilution insurance to follow this strategy.

[Julius Erving]

Just imagine somebody bought 1 million shares at an average of 50 cents. He did pay $500.000,- for those shares.

One can truly say that he lost it all, right now.

Let's say he will buy 10 times the amount he currently has, 10 million shares. At a current price of $0.0005.

That will cost him an additional investment of $5000,-

Then he paid $505.000,- in total for 11 million shares. He brought his average price to 22 cents in the process.

By investing only an additional 1% of his Original sum, he cut his paper loss by more than half.

If that very same person would go for it, and was willing to put in up to 10% of his Original sum, he would own 101 million shares for $550.000,-
By doing so he would have brought his break even point back to $0.0055 a share, from 50 cents.

If somebody never bought shares, and thought now is the time, and would spend $550.000,- he would obtain 1.1 BILLION shares...

Again:

All parties in the oil and gas industry understand that the underlying valuation of the company is distinct from the market valuation. This is not something unique to ERHC. Many small oil and gas exploration companies have found it challenging to raise funds in the current environment, which impacts market value but does not impact the value of the underlying assets.

Just imagine that we get back to 'true value' of 15 cents, the price during the Kenya block 11A announcement, before CEPSA and way before the drilling decision: 101 million shares would be worth 15 million 150 Thousand dollars.

Let's say dilution in the end will be a factor SIX (which is by far not the case now), that 15 cents would equal 90 cents pre dilution.

Not impossible, certainly not if any small amount of commercial oil is truly found.

Let's say resource estimates are really good, we could get close to that number even leading up to drilling maybe... that is: if oil glut fades away somewhat and funding 'issues' are past tense.

Now why would anybody endorse the exact oppposite, and urge to stay away from ERHC, and not even invest an additional 1% these days? imo: strange... risk was Always a factor with an oil exploration OTC BB / PINK stock, right?

In theory risk is even lower now than it has ever been, certainly for new investors, since oil glut is a temporary phenomenon.