Dilution6 Jun 2020 09:15
I do not care much for PL building a personal empire where he owns a 30% stake in a company that has a market cap of £500m if the share price is 0.2p. I want to see the share price increase through organic growth. The constant dilution to raise funds seems to have the opposite effect as to what the purpose is of being a listed company.
In 2010 if you had of invested £10 in Bitcoin compared to £100k in PPC your BTC investment today would be greater than the PPC one. That example is extreme as BTC is the best performing asset of all time but you could do a similar example with a 1oz gold coin or BP shares although the ratio of returns would be much less. (Obviously BTC has outperformed all AIM shares).
If we go back to early 2014 the share price peaked at 48p and there were 395,581,763 shares in issue. 1 million shares would have cost you you £480k then (you would have been unlucky to buy at the peak) and you would own 0.25% of the company. Those same shares today would be worth £18k and you would now own 0.05% of the company.
Again, I appreciate this is an extreme example and hopefully there is nobody on here in this situation. I could have used an older example going back to 2011 when there was less than 100m share in issue.
However it shows what impact this mass dilution has on PIs who do not have infinite funds to invest to average down like PL, IFC, Shcroders, Michinoko and now Trafigura.
There was a good discussion in the investor call when an investor asked PL about the dilution and PLs response was along the lines of "I am in the same boat as you... I have invested £60m..." The difference is that he takes a big salary out of PPC and also has been earning 15% interest on a loan so he is not as reliant on capital appreciation as PIs are. He has managed to average down to the point where he does not need the share price to perform to the multiples that PIs need to break even.
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