FDL flinders diamonds limited

equity or debt raising

  1. 2,382 Posts.
    always good to see companies like FDL rasing capital rather than borrowing.

    if there is so much potential why dilute shareholders equity with a capital raising?

    companies usually evalue which is cheaper, debt or equity and equity is usually raised when the dirctors consider it to be cheaper than debt. the fact that they are rasing capital suggest that the directors think debt is more expensive than equity.

    they will probably pay 5%-6% in fees to Bell Potter for the capital raising and dillute the shareholders equity.
    this is an opportunistic capital raising where the directors feel that their equity is cheap, ie over priced.

    i outlined a few months back, call it early January where i had a bet with Warnie about the share price. i said they would raise capital before the options would expire because they were almost out of cash and everyone said i was wrong. well 6 weeks on and you have your answer.

    ok, i lost the bet but the price was artificially held up and the people who held it up knew what they were doing, got to love the phamtom bids.

    i dont have a view either way on FDL because its hard to buy shares where they only have a resource estimate. $14m wont be enough to drill the whole thing out properly. also consider where the capital is going, ie on your FE dream or maybe they might go looking for more diamonds because they have been so sucessful at it in the past.

    good luck.
 
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