"Dilution Insurance" sounds like a good idea to me-where can I get some and how does it work :) ??
Pricing is a really good question I believe and will depend, amoung a lot of other things, on how they end up raising capital. Assuming another Farm Out is not going to happen and they go to the equity market possible options might be a PIPE, rights offering, or straight public equity (as in the last Rodham and Renshaw episode). I suspect that the PIPE is lower probability, just based on the recent "bridge" preferred equity action (if there were sufficient private equity opportunities, the company would have used them earlier)- that leaves rights and straight public. I tend to believe that rights would be better from a dilution and pricing point of view but am not sure there is sufficient capital available (again look at results of the preferred offering), so they might end up with a public / mixed offering. Then assuming a public offering is underwritten, an issue might be underwriting terms/guarantees and pricing risk to the underwriter; therefor I am expecting some significant price erosion upon a public $18M + equity raise- countervailing that is the idea that the equity raise, if successful, clears the way for drilling and thus should have a positive impact on share price...
Other considerations- do they stick with one well ($18M++) or try for two ($40M ??)- will they issue additional warrants as sweeteners?? What happens to share price between now and the raise??
Bottom line really WAG is 25M+/- assuming one well- just a swag and JMHO
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