Replies to post #16158 on Cardinal Resources Inc fka CDNL

[grantastic]

Entire companies get bought for 40%-50% premium above market price. a 400+% premium for only half the company looks insane.

[grantastic]

Also, allowing CDNL to use the proceeds of selling shares to do a share buyback is idiocy.

Investor bought 51% for $7.5m. That is ~$147k per 1% in ownership.

If CDNL spends $500,000 cancelling shares at the current ~$3m market cap, that means ~16.7% of the shares are cancelled. The remaining shareholders' ownership all increase ~20% due to the reduced O/S.

i.e., the Big Investor who bought 51% ownership will now own 61%.

If the Big Investor had held back that $500k, and invested only $7,000,000, then at the same $147k/1%, they'd have purchased 47.6% of the company.

They could then use that $500k and buy the exact same 16.7% of the shares on the open market. So their total ownership is now 64.3%. I.e. the company still has the exact same amount of capital for debt repayment + investment, but the Big Investor has 4.3% more ownership for the same price.

So according to the public terms of this deal:

1. Investor gave CDNL more cash than CDNL needs to actually grow the business, so CDNL is distributing the excess back to shareholders via a buyback

-and-

2. The multi-million dollar investor will essentially give away 4.3% of its potential ownership in the company.

[CT_StockMouse]

Technically it's in two tranches and the second is dependant on the first, so they don't actually own half yet