The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
Https://www.mining.com/silvercorp-to-acquire-orecorp/
This takeover deal has just been announced and values a project at around $125million that looks similar to Dugbe. Don't think there's any value for Dugbe in HUM's market cap
Directors kept saying they were only going to do project level funding deals so as not to dilute shareholders. The fact they tried to do a big discounted placing and when that failed had to resort to a death spiral facility is a huge disappointment for shareholders.
The directors have lost a lot of credibility with the latest funding deal with Lanstead.
Investors hate these type of deals which rely on the funder regularly selling shares into the market to fund the monthly payments. It puts people off buying as they know it almost always leads to a weakening of the share price.
The person that's has already converted £127k of the loan notes probably did so as to achieve the lowest possible conversion price. If there is a big rise in the share price in the near term then the conversion price will increase significantly, especially if there is also big volume which is likely on the news that's is expected to be imminent
At the time Eileen made the investment the company was in need of funds to tied it over until the the end of Q2 when it was hoped the project level funding would be secured by the Canadian Bank. When the funding didn't materialise the company attempted to arrange a placing at 0.12p but when this failed to attract enough investors it had to go with the Lanstead facility as a last resort
These financing facility providers just want to make a risk-free profit so they regularly sell shares into the market. I'm certain Lanstead will do this and keep 25% of the proceeds and pass on the rest of the proceeds to Oriole. It had a negative impact on the share prices of Immupharma and Nuformix. If you look back far enough in the posts on those boards you'll see plenty of shareholders moaning about it
This is quite a good explanation of how the facility works plus remember Lanstead has also been given 83.7million:
'Lanstead sell shares every day during the VWAP calculation period to raise the money to make the payment that is required. All they need to worry about is ensuring that their sales match the vwap. So month 1 for example they will sell roughly 39m shares; assume the vwap is 0.13, their sales will realise £50,700. They will be obliged to pay Oriole £73,625 * 0.13 / 0.2533 or £37,786. They make a risk free profit of £13k. They have no interest in being long term shareholders of the company.
Unless there are naturally buyers in the market to absorb their sales, the laws of supply and demand result in the share price falling. This is why it is called a death spiral.
Problem is there's no incentive for people to buy shares even at a low price because they know Lanstead will have to sell shares into the market constantly which will suppress the share price further. Better to buy shares in a company that doesn't have a financing facility in place
Coyote - just read your summary of the facility. As well as the fee of 93.7million shares, Lanstead also retains 25% of the proceeds of the 930million shares that it sells into the market that's about 2 to 3 times more expensive than the commission a broker takes for arranging a standard placing
There seems to be a general lack of experience on here about how these types of facilities usually play out and impact the share price. Best to do more research on other companies that have used them. Initially people tend to think news will come to rescue the share price but the very fact that a company has to resort to a facility like this is a sign of desperation
The Lanstead facility is like a placing but spread over 24 months. Each month Lanstead needs to sell shares into the market to finance payments to Oriole. Plus Lanstead has been given an additional 83,700,000 shares. The costs of the facility are far higher than an ordinary placing as Lanstead take a much higher percentage of the funds raised by selling shares.
Legalwolf you are correct that the monthly payments are designed to fund corporate overheads and not pay for drilling
I made it simplistic so other people could understand how the facility works. Lanstead makes a big profit no matter what.
Oriole only does well if the share price is above 0.2355p buth these type of facilities usually results in a big fall in the share price due to the constant selling pressure from Lanstead/Riverfort etc. It's hard enough to make money on AIM but if you buy shares in a company with a funding facility then it's even harder and you're far more likely to make a loss
Very sorry to see the company has had to resort to a death spiral funding facility as it failed to get an ordinary placing away 🙁
I've seen these Lanstead facilities in action on numerous other companies and they tend to destroy the share price as Lanstead continually sell shares in the open market to fund the monthly payments owed to the company. The 0.19p premium mentioned in the RNS is just a spoof in trying to fool people into thinking it is a good deal 🤦