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Strategies & Market Trends : Value Investing
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To: Madharry who wrote (20053)11/14/2004 9:22:21 PM
From: schzammm  Read Replies (1) of 78567
 
Madharry, not sure if you missed the most recent unit sale on Nov. 1 2004 that SME has entered into a non-binding Letter of Intent with Haywood Securities to sell 1,920,500 units at at a price of $1.25 with warrants. I did not go into all the details but you get the idea of what is going on. Haywood gets 8% of the gross sales, plus the purchase of agents warrants, etc.

Also the company will try a non-brokered sale of 800 units themselves.

Most often one has to be very nimble "with story stocks".

The problem with these small companies is that even if they start with a small number of shares, it does not take long to have major dilution selling share for around US$1.00. They burn through the money and management is usually unloading shares they get for nothing by the bushel load. Also it usually is years before successful drilling, if any, takes place and then the infrastructure to transport the gas must be built. I speak from experience and am currently sitting on a couple micro E&Ps and a couple Biotechs that are very similar in nature. That is not to say that there will not be some spectacular plays but usually they take so long that one gives up after two to three years just before the price explosion. Or after sitting on it for so long one is happy to get their money back or a quick profit. The stories are great but not for a value investing thread.
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