So you play with pennies and your Company is going to offer out more shares...(IPO / PP )...what does this mean for you?
A Checklist of Key Factors to Consider:
1) Net Proceeds from the offering - How much money will the company ACTUALLY receive? ( look at the commissions generated from the finders fee..should be NO MORE than 10% on ANYTHING over 1 million )
2) Use of proceeds - How does the company plan on spending the proceeds of the offering?
3) Dilution of Value - How much dilution of the common shares already issued and o/s will result from the offering?
ie.: Before Private Placement, ABC Company had 1,000,000 shares o/s, trading at let's say, $1.00 per share, providing a Market Cap of $1,000,000 dollars.
After Private Placement ( of let's say 1,000,000 additional shares ), ABC Company now has 2,000,000 shares o/s.......BUT GUESS WHAT?!?!?....ABC's market cap is the same, $1,000,000 dollars, however they'll now be trading at 0.50 cents.....do you get it now? So...if you had a position in ABC before they announced their PP.... you just got DILUTED by 50%!!!!
4) Data on Management and/or the Promoter - Just WHO is behind "your" company? Other factors include:
*What is the caliber and experience of the management team and/or the promoter(s) (this is VERY IMPORTANT)
*How successful is the exploration track record of management and/or promoter(s)
*What percentage of ownership in the company does management and/or promoter(s) hold? ( SUPER DUPER IMPORTANT )
5) Location and Development - Where is the Company located? Where do they conduct their business? Where is the current offering being made public? ( over sea’s, local....?)
There you have it class....we're all finished ( for now.....)
So, now you know.... when a company announces a PP... it's a good/bad thing all rolled up into one.... Good for the Company ( as their "kitty" is now full of cash, hence, good for future investing)......but can be BAD if you're already invested, as dilution takes its effect.
This article was written by Placer_foot of StockHidoeut.com
Penny Stocks Penny stock investing site to help members when buying penny stocks.
Mouser57 of StockHidoeut.com
Penny Stocks Penny stock investing site to help members when buying penny stocks.
