Replies to post #99464 on Sarissa Resources Inc (SRSR)

[webpence]

This is a great post ILVELV. Too bad it seems like no one read it or understands that what the company is doing is the path to prosperity.

People apparently think that SRSR positioning itself to raise capital to get to the next stage of development is a bad thing?

The sellers have dumbfounded me today. Do you do any DD?

[jimHorse]

This is the post that finally allowed me to understand what will be happening. As I understand it, Evolving Gold spun out a new gold company called Prosperity. Evolving Gold shareholders were issued a "dividend-in-kind" of 1 share of the new Prosperity company for every 10 shares of Evolving Gold held on Feb 16, 2011. After the spin out, Evolving Gold held 48.5% of the new Prosperity shares.

I looked up the historical prices to get an idea of how the process affected the share prices:
-The spinout announcement was made on Feb. 2, 2011. The day prior to the announcement, the parent company Evolving Gold (TSX-EVG) closed at 0.97.
-On Feb 15, a day before the ex-dividend date, it closed at 0.98.
-On March 3, the spin out was completed and Prosperity (TSXV-PPV) was issued to shareholders at 0.15. Prosperity began its first day of trading opening at 0.17 and closing at 0.25. On that same day, Evolving Gold closed at 0.91.
-As of yesterday, the spun out company closed at 0.60 and the parent company closed at 0.78. So...

If you had owned $1 million worth of Evolving Gold shares on the date they announced the spin out a little more than 2 months ago, you would currently own $804,000 worth of the parent company and $400,000 worth of the spun out company, for a net gain of slightly more than 20%.

Obviously those are both TSX companies, and they have other circumstances that are specific to those companies, but I just wanted to get an idea of how a "spin out" such as this COULD work. Thanks to ILVELV for the original link.