Have investors been fed a lemon. In the short term investors might feel so. In last 2 weeks Gippsland has been posting a lot of encouraging news. It then announces a capital raising which raised $3.2 million. Post-capital raising we learn that there is no firm off-take, and the company has only just appointed a Corporate Advisor to negotiate the details of the agreement. The problem with this is of course that its a bit of 'bait and switch'.
Do shareholders have reason to be confident that they will see a sustained rise in the share price? There is of course selling pressure in the 'high 5's' (i.e. 5 cents), whilst considerable support in the mid 4s. The question is - will that support evaporate when the underwriter (if there was any) has offloaded all the stock? This remains to be seen. It remains to be seen whether Gippsland will be able to commission this protect. I am actually confident it will. Both tantalum and tin have solid demand at the moment. Stark has been a long term supporter of this project.
Shareholders might however be cautious about paying too much for the stock. The announcement can be read here. We might expect that any agreement with Stark will be finalised in the next month...but that is old territory. It has been there before. It might be a few more months before the company is able to secure finance. The company must have known that, so this strikes me as a little unfair in terms of reporting....the timing of this news is disappointing.
This is common practice of course for small stocks firing on one cylinder. Maybe its not their place to set standards...maybe there is a need for an entirely new way of conducting equity raisings. I will outline my suggestion for capital raisings here.
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