OFF TOPIC
Robert, we all know you are not dumb, but very intelligent. Interpret this knowing I am more of a cynic than you. I will try to keep this brief and will be using WSP as an example. In January of this year, with WSP shares trading in the 3.50-4.00 range on excellent diamond assays, Randy Turner (pres.), directors, employees, were granted 2.2 million stock options priced @3.60. Now if I am a potential investor, and doing my DD, i'm thinking : if the insiders/smart money are buying options @3.60, they must believe the co. will be worth a lot more someday. Confidently, I buy my shares @4.00, as do others waiting for my shares to increase. This creates a demand for the stock, and momentum becomes positive as the share price increases. Often, but not always, insiders/smart money will then sell their current positions into this market strength, at very lucrative profits. As demand subsides for the stock for numerous reasons(ie end of promo, lack of news, shakeout), momentum reverses and the stock price declines. This can happen in dramatic fashion like WSP, which went from 4.20 to 1.20 in 20 trading days, or it can happen more gradually. Now the people who have bought and held shares over 4.00, and maybe even averaged down @3.50, and again @3.00 are pissed when they see a news release like: (actual excerpt, June 3/97)
The Company announces that it has amended the exercise price of existing incentive stock options to certain of its directors, officers and employees to purchase up to an aggregate of 2,200,000 common shares of the capital stock of the Company. The exercise price of all of said options will be $1.62 per share, being the ten-day average closing price of the Company's shares as traded on the Vancouver Stock Exchange. The foregoing transaction is subject to acceptance by the applicable securities regulatory bodies.
John A. McDonald
Director and Vice-President, Exploration
Now, a big reason why insiders will change their option price can be because they think the co. will never see 3.60 again, and thus their options are worthless. This is not always the case though, sometimes it is just a profit grab for the insiders. Regardless of the motive, former confident shareholders are no longer confident when they realize insiders do not want to hold options at much higher prices. I will post the parallels I see with GHE in my next post. Hope this helps.
Hugh |
